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Fitch Downgrades Long-Term Issuer Default Ratings On BILT

Fitch Ratings on Monday further downgraded the long-term issuer default ratings on paper maker Ballarpur Industries Ltd. (BILT) and its subsidiary BILT Paper BV to a more speculative grade.

Citing severe liquidity constraints and inevitable default, the agency said it has downgraded ratings on BILT and its subsidiary "to C from CCC". In January, Fitch had downgraded BILT and its arm "to CCC, from B-", citing worsening liquidity situation and curbing of operations of the company due to inadequate working capital. According to the rating agency, on March 15, BILT stated that it was in discussions with a domestic mutual fund on steps to resolve a potential default amicably.

"BILT has not been forthcoming in providing Fitch and other relevant market participants with updates needed to adequately assess its liquidity position," it said.

There have been no announcements by BILT on material progress in these negotiations since then, indicating that a default is imminent, Fitch added.

Highlighting BILT's worsening liquidity position, the rating agency said the company had reported cash of just Rs 3.9 crore at end of September 2016 and incurred an EBITDA loss of Rs 6.2 crore in the first half of 2016-17. At end-March 2016, BILT had Rs 2,060 crore of short-term and Rs 920 crore of long-term debt maturing in 2016-17.

"The existing lenders are unlikely to be willing to grant further credit to BILT, given its minimal cash balances and weak operating cash flow," Fitch noted.

Earlier in January, Fitch had highlighted that BILT would have exhausted almost all possible remedies to avoid a debt default or restructuring if its discussions to secure funding and monetise assets are delayed or fail.

Stressing on the unsustainable debt maturity profile of BILT, Fitch said that although the company is in talks to secure debt and equity funding, it is unlikely that additional financing alone would be adequate to address its debt maturities of over Rs 2,500 crore over the next three years.