The Securities and Exchange Board of India in its Circular dated 3rd January, 2020 has issued directions on strengthening the rating process of the CRAs with regard to instance where the issuer is not cooperating. The Circular shall be effective from 1st July 2020.
Key Highlights:
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. No CRA shall assign any new ratings to such issuer until the issuer resumes cooperation or the rating is withdrawn, if non-cooperation by the issuer continues for further six months. It shall be effective from July 01, 2020.
The CRA may withdraw a rating in case of multiple ratings on an instrument, provided the CRA has rated the instrument continuously for 3 years or 50 per cent of the tenure of the instrument, whichever is higher; and received No-objection Certificate (NOC) from 75% of bondholders of the outstanding debt for withdrawal of rating; and received an undertaking from the issuer that another rating is available on that instrument.
Further at the time of withdrawal the CRA shall assign a rating to such instrument and issue press release mentioning the reasons for withdrawal of rating.
Click here to read the Notification.
