Reliance Communications Defaults in High-Profile India Test

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The first default on U.S. dollar bonds by an Indian company in 15 months may become a closely-watched test case for how international creditors will fare under the country’s new bankruptcy laws, Bloomberg News reported. Reliance Communications Ltd., the Indian mobile phone operator controlled by billionaire Anil Ambani, failed to pay a coupon on its 2020 dollar notes before the expiry of a grace period on Monday, according to a person familiar with the matter. It’s India’s most high-profile default on international debt since the nation’s insolvency and bankruptcy code was passed in May 2016. The company’s shares and bonds fell to record lows. The new rules, part of Prime Minister Narendra Modi’s push to make India more investor-friendly, are designed to speed up debt restructurings in a country whose banking system is plagued by the highest stressed-asset ratio in 17 years. An improved resolution process would not only encourage foreign money managers to increase holdings of Indian distressed debt, it could also help reduce borrowing costs for companies across the credit spectrum. Read more.