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‘Govt will pay bond interest dues of MTNL, there will be no default’

‘Govt will pay bond interest dues of MTNL, there will be no default’
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New Delhi: The government will pay the bond dues of ailing Mahanagar Telephone Nigam Ltd (MTNL), a DoT source said assuring that there will be no default, and that the amount will be paid before the due date of July 20.

The move assumes significance as it would avert a looming crisis for the telecom corporation which is being seen teetering on the brink with regard to its debt obligations that are becoming due. All eyes are on MTNL, ever since the debt-laden firm last week expressed its inability to make interest payments to certain bondholders due to paucity of funds.

Telecom Department sources said that the government will step in and pay the said dues, and asserted that there won’t be any default on the same.

In this particular case, where the second semi-annual interest (7.59 per cent) on certain bonds is falling due on July 20, 2024, DoT sources said that “the dues will be paid before the date”.

Amid mounting financial woes, MTNL last week informed in a statutory filing that it is unable to make interest payments to certain bondholders “due to insufficient funds”.

“The second semi annual interest with regard to 7.59 per cent MTNL’s bond series...is due on July 20, 2024. As per the structured payment mechanism of Tripartite agreement (TPA) signed among MTNL, Department of Telecom and Beacon Trusteeship Ltd, MTNL has to fund the semi-annual interest into the Escrow account with adequate amount 10 days before the due date,” it said.

MTNL informed that in the wake of provisions of TPA, and due to insufficient funds, it could not fund the escrow account with an adequate amount. MTNL, which offers telecom services in Delhi and Mumbai, has seen a steady erosion in its subscriber base over the past years. MTNL’s losses mounted to Rs 3,267.5 crore for FY24, from Rs 2,915.1 crore in FY23. The revenue from operations for the year ended March 2024 fell to Rs 798.56 crore, down 14.6 per cent from a year ago.

In an update on MTNL on July 12, India Ratings and Research said it “received an intimation from the trustee dated 11 July 2024, confirming that the escrow account is not funded by T-10 days from the due date of payment of the interest which is due on 20

July 2024.

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