Financial Daily from THE HINDU group of publications
Wednesday, Jul 02, 2003
Financial Daily from THE HINDU group of publications Wednesday, Jul 02, 2003 |
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Money & Banking
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Credit Rating Markets - Financial Services Oscar Investment's debenture rated `high safety' Our Bureau
KOLKATA, July 1 ICRA has assigned a conditional LAA (SO) rating to the Rs 75-crore share-backed debenture programme of Oscar Investments Ltd, a company promoted by the Ranbaxy group. This is the first share-backed programme of its kind announced by the rating agency. The rating is based on a pledge of Ranbaxy Laboratories Ltd (RLL) shares, value & volume triggers and funding mechanism of the debt servicing reserve account to ensure timely payment of obligations. It indicates high safety. The rating, according to a press note issued by ICRA, does not rely on direct financial support from RLL. However, it takes into account the company's business prospects and financials, which are likely to have a favourable impact on its performance as collateral. It further considers covenants restricting future debt raising by Oscar Investments. Oscar Investments, incidentally, is one of the investment outfits of the Ranbaxy group; it holds 4.13 per cent of RLL's share capital. The company proposes to use the proceeds of the rated debentures for general corporate purposes, including retiring of existing high-cost debt of the group. "The rated debenture would be collateralised by a pledge of RLL shares to the extent of 2.25 to 2.5 times the debenture value, which would ensure that the investors have sufficient protection in terms of collateral value," the press note has mentioned. Volume triggers (which require that shares be sold and replaced by cash as collateral in case volumes in the RLL scrip fall below specified values) ensure that the collateral remains liquid at all times. RLL, the rating agency has pointed out, is a constituent of major indices such as Sensex and Nifty. Its low impact cost, relatively high market capitalisation and high traded volume are "positives" for the rating. ICRA has also claimed it has tested the structure under scenarios of "substantial declines in value and liquidity in the RLL scrip". The structure is said to be "operation intensive and relies on the trustee (UTI Bank) and the designated securities firm (DSP Merrill Lynch) to act in a timely manner".
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