Foreign currency convertible bonds fail to favour SMEs

NEW DELHI:SMEs are facing tough time as it is proving difficult to mobilise funds through foreign currency convertible bonds(FCCBs)from foreign investors.The conversion price which was reset to reduce foreign debt of earlier issuers has been receiving negative response from the investors.

The first seven months, witnessed nine months mobilise $695 million, whereas 10 other proposals to raise FCCBs worth $1.13 billion are still awaiting. Mr. Prashant Sawant, Analyst at KNG Securities LLP said that investors reaction has not been promising despite higher coupons and low conversion premiums offered by issuers.

Moreover, it was also said that FCCBs issuers failed to utilise the conversion price to reduce the overseas debt. Only a few companies have reset the conversion price. Currently, FCCBs worth $11.5 billion raised by 114 companies are outstanding. FCCBs worth $321 million are expected for final redemption during the second half of 2010.