9th Jun

Out of love with Eros? 6.5% 2021 retail bond plummets on ORB

In February 2018 Retail Bond Expert reported that following a period of significant distress, the bonds had recovered to around 80 and on that basis represented a 13.25% yield to maturity. See the full story here

 Its price subsequently recovered and it had been chugging along at, or about 90%, seemingly in a calm run in to maturity.

'the price collapsed from its close on Wednesday last week at 92.88 to briefly touch 43-and-a-half'

However, that is until the price collapsed from its close on Wednesday last week at 92.88 to briefly touch 43-and-a-half.

As reported by The Daily Fix, there has been some uncertainty for some time regarding the company, in particular the treatment of receivables and the valuation of its IP (the films).

Wednesday evening saw Indian rating agency Care downgrade Eros International Media to ‘D’; the Economic Times of India states delays or likely defaults in serving debt availed from banks.

See link to website here.

The announcement came post the US close and accordingly Eros shares were broadly unchanged in the US session.

The Indian-listed Eros International Media dropped $13 to $53 in the local session.

One point of concern for the bondholders is the complex structure of the group, which places some distance between the bond holders and the assets.

One thing for sure is that this is far from business as usual and with the backdrop of some pretty bleak news from the likes of London Capital & Finance, Woodford and P2P’s Lendy, there are understandable concerns that the bond will default.

Having closed at 53 on Thursday, by stumps on Friday 7th of June the retail bond had clawed its way back to 71-and-an-eighth and was seemingly heading back to the levels that it had enjoyed for the last year or so.

'for those not able to sit this one out to redemption, it is not for the feint-hearted'

However, when the price hit 94 at the end of May 2018, that was up from a low of 55 in August 2017; clearly for those not able to sit this one out to redemption, it is not for the feint-hearted.

With just 28 months to go until the retail bond redeems at par – 100 – there could be a very decent return for those choosing to buy in any-time-soon; however, those in the Mark Twain camp more concerned with the return of, rather than the return on their money would possibly justifiably be concerned that this could be the first ORB listed bond to default.

There is currently a dearth of information, but one City fixed-income specialist told Mr Bond that with rumours of a tie-up with Amazon Prime and the fact that Reliance Industries, one of India’s largest companies – owned a 5% stake in Eros, meant that he didn’t think the chances of a default were high.

The excellent Daily Fix has promised more information when it is available and in the meantime, it will be an interesting day on ORB tomorrow.

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