Taking into account the practical issues faced by companies due to the COVID-19 pandemic, the Securities and Exchange Board of India (SEBI) has allowed credit rating agencies (CRAs) to bypass the 90-day curing period to revise ratings from default to non-investment grade.
While current norms bar CRAs from revising the ratings before 90 days, few companies were able to meet their payment obligations a few days after the due date due to COVID-19-related delays.
The rating agencies were, however, not able to revise the ratings due to the regulatory framework.
“It has been noted in a few recent cases of defaults that even though the rated entity was able to correct the default within a relatively shorter span of time, the rating could not be upgraded and continued to be under sub-investment grade due to the extant provisions on post-default curing period of 90 days for the rating to move from default to speculative grade and generally 365 days for default to investment grade,” stated a SEBI circular.
The capital market watchdog has said that CRAs can deviate from the said period of 90 days on a case-to-case basis, subject to the agencies framing a detailed policy in this regard.