MTNL Misses Escrow Transfer For Bond Payment Due On Dec. 1

Mahanagar Telephone Nigam Ltd. said on Friday that it was unable to fund the escrow account for bond interest payment due on Dec.1, due to insufficient funds.

The funds were required for the fourth semi-annual interest payment on the "7.87% MTNL Bond Series VII-B", according to an exchange filing.

The bond payment is governed by a structured payment mechanism under a tripartite agreement involving MTNL, the Department of Telecommunications, and Beacon Trusteeship Ltd. According to the agreement, the state-run telecom firm is required to deposit the necessary funds into the escrow account at least 10 days before the due date.

These bonds carry a sovereign guarantee from the Government of India, ensuring bondholders' security. If MTNL defaults on principal or interest payments, the sovereign guarantee can be invoked by the debenture trustee. The government is then obligated to cover the payment, the filing said.

The tripartite pact, filed with the BSE at the time of bond listing, underscores the government’s backing of the bonds.

In the quarter ended Sept. 30, MTNL recorded a consolidated net loss of Rs 890.28 crore, compared to a loss of Rs 773.46 crore in the preceding three-month period ended June 30, as per the financial results declared by the state-run telecom firm on Nov. 14.

On Nov. 12, it was reported that MTNL's Rs 1,094-crore slippage impacted Bank of India's July-September results, forcing the lender to make Rs 200 crore in provisions. Bank of India's total slippages rose to Rs 2,546 crore, up from Rs 1,930 crore in the June quarter.

Previously classified as a non-performing asset by SBI, MTNL faces defaults amid a cash crunch.

Last month, NDTV Profit had reported that the Indian government plans to revive the ailing MTNL. The government has ruled out any bankruptcy or merger arrangement, according to people aware of the development.

Shares of MTNL on Friday closed 1.03% higher to Rs 42.96 apiece on the NSE, compared to a 2.39% climb in the benchmark Nifty 50.