SEBI Updates Strengthening of the rating process in respect of ‘INC’ ratings

1. SEBI vide circular  dated November 21, 2019 mandated listed companies to make public disclosure on stock exchanges of: a. default in payment of interest/installment obligations on loans, including revolving facilities like cash credit, from banks/financial institutions which continues beyond 30 days and b. default in case of unlisted debt securities i.e. NCDs and NCRPS, promptly but not later than 24 hours from the occurrence of the default. 

2. In partial modification to SEBI Circular  dated June 30, 2017, the No Default Statement (NDS) is being aligned with the requirements of the aforementioned circular. The revised NDS is placed at Annexure A. (Please find it below attached) 
3. In order to further strengthen the rating process of the CRAs with regard to ‘Issuer not cooperating’ (INC) ratings, following directions are being issued: 
a. If an issuer has all the outstanding ratings as non-cooperative for more than 6 months, then the CRA shall downgrade the rating assigned to the instrument of such issuer to non-investment grade with INC status. If non-cooperation by the issuer continues for further six months from the date of downgrade to non-investment grade, no CRA shall assign any new ratings to such issuer until the issuer resumes cooperation or the rating is withdrawn. 
b. The withdrawal norms for the ratings have been stipulated vide Circular  dated June 06, 2018. However, in case of multiple ratings on an instrument (where there is no regulatory mandate for multiple ratings), a CRA may withdraw a rating earlier than stipulated in the aforementioned circular, provided the CRA has: 
i. rated the instrument continuously for 3 years or 50 per cent of the tenure of the instrument, whichever is higher; and ii. received No-objection Certificate (NOC) from 75% of bondholders of the outstanding debt for withdrawal of rating; and iii. received an undertaking from the issuer that another rating is available on that instrument.  

  c. At the time of withdrawal, the CRA shall assign a rating to such instrument and issue a press release, as per the format prescribed vide Circular dated November 01, 2016. The Press Release shall also mention the reason(s) for withdrawal of rating. 
4. Applicability: The circular shall be applicable with immediate effect except para 3(a) which shall be effective from July 01, 2020. 

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