MUMBAI: The leading ratings agency CRISIL has downgraded the Andhra Pradesh Capital Region Development Authority's (APCRDA) bonds valued Rs 2,000 c, to 'CRISIL A-(CE)' from 'CRISIL A+(CE)', and placed the ratings on 'Ratings Watch with Negative Implications'.

This is owing to the region's failure to keep cash in the debt service reserve account equal to the next two quarters' worth of debt servicing commitments, which results in non-adherence to the T-structure by the region.

According to the ratings agency, "the rating action also reflects the rising strain on the guarantor, GoAPfinancial ,'s risk profile, as evidenced, among other things, in the decline in its funding support to meet APCRDA's debt repayment obligations."

The T-structure mandates that the government of Andhra Pradesh credit the bond servicing account with cash equal to 1.5 times the future debt repayment obligation in advance.

The bond servicing account will need to be funded with money from the DSRA if this is not done by T1-7 days.
The trustee dipped into the DSRA and used about Rs 26 crore to partially service the interest of Rs 52 crore because the account did not have enough money in it to cover the requirement to pay interest that was due on August 16. 
Consequently, APCRDA currently has only 1.5 quarters of funded DSRA.

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