SEBI provides relaxation to Credit Rating Agencies in recognition of default for restructuring by the lender/ investors solely due to COVID -19 related stress.
The discretion is with the valuation agencies engaged by AMCs / AMFI for recognition of default in case proposals of restructuring of debt are solely due to COVID-19 related stress. For the said purpose, any proposal of restructuring received by Debenture Trustees should be communicated to investors immediately. Further, any proposal received by Mutual Funds from lenders /issuer/Debenture Trustees should be reported immediately to the valuation agencies (along with the other material information required for the purpose of valuation), Credit Rating Agencies and AMFI. AMFI, on receipt of such information, should immediately disseminate it to its members.
Further, if the valuation agency, based on its assessment of the proposal ,is of the view that the proposed restructuring is solely due to fallout of COVID -19 pandemic then the valuation agency may not consider the restructuring / non receipt of the dues as a default for the purpose of valuation of money market or debt securities held by Mutual Funds. Further, valuation agencies should ensure that change in terms of investment, financial stress of the issuer and the capability of issuer to repay the dues/borrowings on the extended dates are reflected in the valuation of the securities. In case there is any difference in the valuation of securities provided by two valuation agencies, the conservative valuation should be accepted.
The above modification would be in force till December 12, 2020.