New Delhi: Market regulator Sebi has expanded its probe into the role of five credit rating agencies after a forensic audit mandated by the new board of crisis-ridden IL&FS flagged serious lapses and their possible complicity with the former top brass of the group in giving top ratings despite weak financials. While CEOs of two rating agencies have already been forced to go on leave pending completion of the probe on the advice of Sebi, officials said the regulator is now looking into possible systemic lapses at all five rating agencies and also into the role of multiple people suspected to have intentionally manipulated the rating procedures. Also Read – Thermal coal import may surpass 200 MT this fiscalThe special audit conducted by Grant Thornton found that its review of emails exchanged by the former key executives of Infrastructure Leasing and Financial Services (IL&FS) group and the top officials of rating agencies showed that they were aware of the serious liquidity concerns and weakening financials of the group. “However, various strategies deployed by the then key officials of IL&FS group and certain favours/gifts provided to rating agency officials suggest the possible reasons for consistent good ratings provided to IL&FS group during the period June 2012 to June 2018,” an interim report of the special audit said. Also Read – Food grain output seen at 140.57 mt in current fiscal on monsoon boostThe report has also highlighted instances where CRAs had “initially decided to downgrade the ratings, but a combination of tactics employed by then key employees of IL&FS and favours/gifts extended to key officials of CRAs resulted in either consistent/good ratings or avoidance of rating downgrade”. The new board of IL&FS, which was appointed in October last year after massive defaults by the group post its debt burden ballooning to over Rs 90,000 crore and suspected wrong-doings by the former top management, had mandated Grant Thornton to carry out a a special audit for all high-value transactions undertaken by IL&FS Ltd and some of its group companies for the period between April 2013 and September 2018. The audit is aimed at identifying siphoning or misuse of funds, fraudulent transactions, their modus operandi, the quantum of the financial loss and fixing of responsibility. Grant Thornton was also asked to review the ratings provided by various credit rating agencies (CRAs) to IL&FS Transportation Networks Ltd (ITNL), IL&FS Financial Services Ltd (IFIN) and IL&FS Ltd. In its interim report, Grant Thornton said it appears CRAs had consistently provided and maintained good ratings over the years until in July/August 2018 when they downgraded ratings for the first time for ITNL due to a default of repayment of commercial papers. During the review period, IL&FS Group had availed rating services from Crisil Ltd, CARE Ratings, ICRA, India Ratings (a Fitch group company) and Brickwork. Officials at the rating agencies denied any lapses on their part and some even said the interim report seems to suggest limited knowledge of the rating process and was based on one-sided information. A higher rating typically helps a borrower get a lower rate of interest and is aimed at assuring investors about the creditworthiness of the company. Besides, it helps create a wider borrowing landscape for the company and is also often used as a marketing tool in the form of a better image in dealing with customers. Grant Thornton said it identified multiple e-mails over the period from 2008 to 2018 which indicate that the IL&FS group was under stress or faced liquidity issues since 2015. The main reasons for the liquidity crunch have been identified as a significant increase in debt in the various group companies, majorly ITNL, high capital requirement for ITNL and its various SPVs, decreasing profit of IL&FS group and support to weaker group companies. It has also identified instances which suggest that CRAs had multiple concerns for the last 6-7 years on the operations of the IL&FS group, but the ratings assigned by them remained consistently high until they were reversed or downgraded after June-July 2018. Listing potential strategies undertaken by the former top brass of IL&FS to get good ratings or avoid a downgrade, the report said the rationale which is supposed to be drafted by the rating agencies were materially modified on suggestions from the then key employees of the group. In cases where IL&FS became aware that ratings were not going to be favourable, they either delayed the process of rating surveillance or avoided the rating being made public. In certain instances, intentionally incorrect or incomplete information was being provided to the CRAs to avoid rating downgrade. In cases of desired ratings not being received, the IL&FS management used to exert pressure on rating agencies to either withdraw the ratings or approach other rating agencies who would provide the desired ratings. The audit also cited several e-mails suggesting that the CRAs, after meeting with the then key employees of IL&FS, would not downgrade their ratings as initially decided. The special audit has also flagged a potential conflict of interest between IL&FS and CARE, as for the period 2007 to 2013, IL&FS Ltd and IFIN owned equity shares of approximately 5-9 per cent in the rating agency. During the same period, CARE had also provided ratings to instruments of IFIN, ITNL and IL&FS Ltd, indicating a potential conflict of interest as CARE was rating its equity shareholder.
AddThis Sharing ButtonsShare to TwitterTwitterShare to FacebookFacebookShare to RedditRedditShare to 電子郵件Email Wynne rejects beer sales in corner stores as Ontario reviews rules on alcohol TORONTO – Ontario is preparing changes to the way alcoholic beverages are sold, but it will not permit beer sales in corner stores, Premier Kathleen Wynne said Monday.It was another Liberal premier, David Peterson, who first promised Ontarians back in the 1980s that they’d be able to buy beer and wine at the corner store, just like their neighbours in Quebec. But Peterson never delivered on the pledge, and Wynne said the idea is now off the table.“We’re not going to have beer in convenience stores,” she said. “There is change coming however.”The Ontario Convenience Stores Association said the province already has more than 200 LCBO agency stores, which are convenience stores in smaller, remote communities that sell LCBO products, and asked the government to expand that model.“By piloting an expansion of this program in an urban or suburban community … government will be able to build on the success of this program while stimulating local economies and increasing LCBO revenues,” said spokesman Dave Bryans.Wynne said she’s been concerned for years about the foreign-owned Beer Store’s virtual monopoly on 80 per cent of beer sales in Ontario.“I was concerned about the functioning of the Beer Store. I was concerned about the access of craft brewers to the Beer Store, and so from that time I’ve been committed to making change,” she said. “It’s not whether there will be change. It’s just a matter of what that change will be, so stay tuned.”Wynne appointed former TD Bank CEO Ed Clark to examine the relationship between the Liquor Control Board of Ontario and the Beer Store as part of a review aimed at squeezing the maximum value out of all government assets.“We now have Ed Clark and his commissioners, who are looking at the (alcohol) distribution system in the province,” she said. “They’re looking at the LCBO and as a result of that looking at the Beer Store, so there are changes coming.”Clark rejected privatizing the LCBO in an interim report, and recommended the Beer Store give taxpayers a “fair share” of its profits, saying its virtual monopoly could be auctioned off if the Beer Store doesn’t want to pay a still undetermined fee to the government.Ontario craft brewers say their market share is held back by the Beer Store, which makes it difficult — and expensive — for them to sell their products in its 448 retail outlets.The Beer Store offered to let craft brewers buy an ownership share and promised to make it easier for them to list their products, but the smaller brewers said they wanted to wait and see what action the government takes.Clark’s final report will be given to the government in time for the recommendations to be included in the spring budget, but it is not expected to be made public before then.The Beer Store, the commercial name for Brewers Retail, was owned by a consortium of Ontario-based brewers when it was set up in 1927, but is now owned by Molson-Coors of the United States, AB InBev of Belgium and Sapporo of Japan.Follow @CPnewsboy on Twitter by Keith Leslie, The Canadian Press Posted Feb 2, 2015 8:44 am MDT
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