Jain Irrigation Systems
has been cut to “selective default” by S&P Global Ratings, as more cracks emerge in the country’s offshore junk bond market.
The company missed certain principal payments under its working capital facilities and S&P sees a “high likelihood” that the firm would be classified as a nonperforming asset by its bankers. A selective default means S&P believes a firm has defaulted on a specific issue but will meet its other obligations.
“In our view, there is a significant likelihood that Jain Irrigation’s liquidity crunch would spread to its international business, leading to a default on its US dollar bonds as well,” S&P said in a statement.
Delayed collection of government receivables and erratic monsoons in India continue to stress Jain Irrigation’s cash flows, according to S&P.
The company’s financial stumble comes after a unit of Reliance Communications filed for bankruptcy protection last month, as a funding crunch due to turmoil in the shadow banking system
sours sentiment in the country’s debt market.