Nearly 20% of $7-billion foreign currency convertible bonds face default risk this year, says Fitch

At least 20% of the $7-billion foreign currency convertible bonds (FCCB) due for conversion this year face default risk as investors demand funds back due to stock prices languishing at less than half the stated conversion price, Fitch Ratings has forecast. Over 60% of such FCCBs are from the IT (34%) and pharma (30%) sectors. The ratings firm says FCCBs of 59 companies are up for redemption this year. About 63% of the $7-billion FCCBs are likely to be redeemed; the companies concerned would finance it with a combination of internal accruals and fresh borrowings. About 17% of the FCCBs are likely to be restructured (mostly maturity extensions), according to Fitch. But the remaining 20% of the amount of 19 firms are likely to default with ensuing restructuring, possibly having significant distressed debt exchange (DDE) features.

Source: Economic Times