MTNL Struggles with Bond Payment, Relies on Sovereign Guarantee

State-run telecom company MTNL has failed to repay a significant bond payment due on August 24. Despite a tri-partite agreement ensuring funding ten days before the due date, MTNL could not secure the necessary funds. The bonds are sovereign guaranteed, assuring government intervention in event of default.

On Thursday, state-run telecom giant MTNL announced its failure to meet a crucial bond payment due on August 24. The company refrained from disclosing the exact amount owed.

According to MTNL's regulatory filing, the fourth semi-annual interest of 7.61% on MTNL Bond Series VIIIB was scheduled for August 24. Under the structured payment mechanism, a tri-partite agreement involving MTNL, the Department of Telecommunications, and Beacon Trusteeship Ltd mandated that MTNL deposit the necessary amount into an escrow account held by Bank of India, ten days in advance.

The debt-ridden organization attributed the missed payment to insufficient funding. However, all bonds issued by MTNL carry a sovereign guarantee. Should MTNL default on principal or interest payments, the responsible debenture trustee will activate the sovereign guarantee, obligating the Indian government to cover the shortfall.

(With inputs from agencies.)