India’s Lehman Genie Is Out of the Bottle Again
An IL&FS unit’s unexpected default threatens to upend the shadow-banking industry.
The bankruptcy tribunal should be careful what it wishes for.
Photographer: Manan Vatsyayana/AFP/Getty Images
First, it was the IL&FS Group that ran out of money. Now that the bankrupt Indian infrastructure lender-operator has been sequestered from creditors, the country’s securitization industry is on borrowed time.
It all began on Tuesday with S&P Global’s Indian affiliate, Crisil, downgrading Jharkhand Road Projects Implementation Co.’s annuity-backed bonds to D after it skipped interest and principal payments. It’s a strategic default on an instrument rated AA just last week. The borrower had money. It reneged on the obligation because the IL&FS parent and 348 group companies have been allowed by the country’s bankruptcy tribunal to block creditors while a government-appointed board sorts out the $12.8 billion debt load.