Credit rating agencies for years assigned high ratings to India’s Infrastructure Leasing & Financial Services (IL&FS) and its group companies despite its deteriorating finances, according to a special audit.Audit firm Grant Thornton was appointed by IL&FS’ new board to conduct the review following the government’s decision to take charge of the group after its defaults on debt obligations sparked fears of financial contagion.Grant Thornton reviewed the role of five credit rating agencies – Fitch group’s India Ratings and Research, the Indian affiliate of Moody’s, ICRA, Standard & Poor’s local unit Crisil, CARE Ratings and Brickwork Ratings India – which assigned 429 ratings to various IL&FS financial instruments in recent years.In a 105-page report, reviewed by Reuters on Saturday, Grant Thornton said the agencies raised multiple concerns on IL&FS group’s financial stress and liquidity position between June 2012 and June 2018, but continued to assign “consistently high” ratings which were only downgraded or reversed last year.”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,” said Grant Thornton in its report that detailed gifts or favours such as smartwatches and tickets to overseas sporting events.IL&FS declined to comment. India Ratings said the Grant Thornton report is based on “partial and selective source material”, adding “our ratings were based on robust and transparent analysis of relevant information”.advertisementBrickwork said it did not assign the highest ratings to IL&FS “because it follows robust, transparent and consistent rating methodology” and its actions were not influenced by any commercial pressures or rating withdrawal requests.ICRA said it will determine an appropriate course of action and was examining the report, which it said ignores the “alleged fraud perpetrated by former IL&FS management”.Crisil and CARE did not immediately respond to a request for comment.The IL&FS crisis that started last year has sparked a series of federal probes into the firm’s operations, but Grant Thornton’s report raises questions on whether rating agencies misled investors about the stress levels at other companies in India’s shadow banking sector, where new fractures are emerging.Dewan Housing Finance Corp, another top firm in the sector, last week warned its financial situation was dire, raising more worries about the sector’s health and signalling the crisis was far from over.”These instances show a glimpse into the incestuous financial services industry where quid pro quo has become the norm. The rot … is deep and needs more cleansing,” said Shriram Subramanian, a corporate governance expert at proxy advisory firm InGovern.FOOTBALL TICKETS, SMART WATCHESGrant Thornton’s review of communication between former IL&FS employees and ratings agencies found the company at times “used to potentially pressurize” rating firms to withdraw their assessment if the company did not receive a favourable rating.It also found instances where credit rating agencies would meet with IL&FS employees and then decide not to downgrade the ratings they had initially decided on, the report said.”It appears that various potential strategies noted above were applied to ensure favorable ratings or to avoid the rating downgrade,” Grant Thornton said.Highlighting “potential favours/gifts”, Grant Thornton said various key officials at rating agencies received gifts such as smartwatches, shirts and coasters.E-mail communication showed a former IL&FS employee had facilitated the purchase of a villa at a steep discount for the wife of a senior Fitch executive, while another had arranged football tickets for a Brickwork Ratings executive to a Real Madrid game, the report added.Brickwork said it had shared “a detailed response” on this specific allegation with IL&FS’ new management. Fitch in a statement said the employee involved had violated the agency’s code of conduct and was no longer employed.India’s market regulator has toughened regulations for credit rating agencies over the past three years to boost monitoring and bring clarity for investors. Following the IL&FS crisis, the regulator last month ordered enhanced disclosure norms for such agencies.ALSO READ | Mutual Funds dump one-fourth commercial paper in a yearALSO READ | Housing lender DHFL warns it may not survive as a going concernALSO WATCH | Strike a balance between term and investment plans
zoom Luxembourg-based short sea specialist CLdN RoRo has taken delivery of its first newbuilding vessel from the next generation of super RoRos, the MV CELINE.Originally code named the G9, the 234-meter-long ship will add 8.000 lane meters to the CLdN network, according to the company.Following a debut voyage from the South Korea’s Hyundai Shipyard, where it was constructed, MV CELINE arrived at its home ports of Zeebrugge and Rotterdam on October 25, according to AIS data provided by Marine Traffic.The new ship will operate on a rotational schedule, including both ports of Zeebrugge and Rotterdam; Dublin, Ireland and London/Killingholme, UK.“We are delighted to be able to welcome the eagerly anticipated arrival of the first of 12 vessels of our previously announced fleet enhancement strategy,” a spokesperson for CLdN said.“With the CELINE’s green credentials, including being LNG ready and offering unparalleled flexibility, we envisage CLdN is poised to commence delivery of their ambitions,” the spokesperson added.The second 8,000 lane meter vessel under the order is sceduled to join its owner this year.In September 2015, CLdN Ro-Ro unveiled its expansion program, looking to order up to 12 new vessels, of which six have been confirmed until now.In March 2016, the firm ordered two RoRo vessels from Croatian shipbuilder Uljanik, with an option for further four. Two additional 5,400 lane meter vessels were ordered from Hyundai Heavy Industries (HHI), with options for a further four of the same class, in February 2017.CLdN operates 24 RoRo vessels, offering sailings between the ports of Zeebrugge, Rotterdam, London, Killingholme, Dublin, Gothenburg, Esbjerg, Hirtshals, Santander and Porto.
Five stories in the news for Tuesday, Dec. 11———BAIL HEARING CONTINUES TODAY FOR CHINESE EXECA bail hearing continues today in Vancouver for a top executive of Chinese tech giant Huawei, who the United States demands be extradited for fraud. The B.C. Supreme Court heard Monday that the U.S. is showing its hostility toward Huawei by speculating the executive has avoided travelling there to dodge charges. The U.S. wants 46-year-old CFO Meng Wanzhou to face allegations of fraud related to the use of its subsidiary Skycom to do business with Iranian telecommunications companies between 2009 and 2014.———ELECTION BILL PASSED IN TIME FOR FALL VOTELegislation aimed at preventing foreign interference and constraining the influence of big money in Canadian elections has been approved by the Senate. Bill C-76 passed in the upper house late Monday on a vote of 54-31 and is expected to receive royal assent later this week. That means the reforms will apply during next year’s federal election campaign. Chief electoral officer Stephane Perrault had warned that the much-delayed bill must go into effect by the end of this year if the independent elections watchdog was to have time to implement the reforms for next year’s campaign.———DEFENCE TO CALL WITNESSES IN STAMPEDER TRIALThe defence lawyer of a man accused of fatally shooting a member of the Calgary Stampeders is expected to call one or two witnesses to court today. Prosecutors wrapped up their case Monday against 21-year-old Nelson Lugela, who is on trial for second-degree murder. He was charged after Mylan Hicks was shot in the chest and abdomen in the early hours of Sept. 25, 2016. Between 15 and 25 members of the football team had been at the bar celebrating a last-minute victory over Winnipeg hours earlier. Testimony has heard there was an altercation over a spilled drink earlier in the evening, which reignited in the parking lot after the club closed.———COALITION AVENIR QUEBEC CAPTURES LIBERAL SEATThe governing Coalition Avenir Quebec has passed its first electoral test since winning the Oct. 1 provincial vote, easily capturing the riding of Roberval left vacant by former Liberal premier Philippe Couillard. With three-quarters of the votes counted in a byelection Monday, Coalition candidate Nancy Guillemette, director of a local mental-health organization, was well ahead with more than 50 per cent of the total. Premier Francois Legault joined Guillemette on stage to celebrate the win. On Twitter he wrote, “Thanks to this victory, we now have 75 elected members. Not bad for a new party!”———GASES BUBBLING OUT OF B.C.’S MOUNT MEAGERA scientist who studies volcanoes says climate change is causing glaciers atop Mount Meager in British Columbia to shrink, increasing the chances of landslides and even a new eruption. Glyn Williams-Jones, from Simon Fraser University, says Mount Meager has been spewing water vapour, carbon dioxide and hydrogen sulphide for about two years. Williams-Jones says the slope of the volcano is moving northwest at the rate of about three centimetres a month, which increases the potential for a landslide. He says if that happens, the change in pressure could destabilize the magma chamber beneath the volcano leading to an eruption.———IN THE NEWS:— Environment Minister Catherine McKenna holds a teleconference to discuss Canada’s international and domestic climate action and provide an update on the ongoing work with partners at COP24.— Matthew Vincent Raymond, accused of killing four people including two city police officers, is due back in court. The court is expected to discuss a further assessment to determine criminal responsibility.— Public Safety Minister Ralph Goodale will hold a news conference today on a national security issue after a briefing from officials earlier in the day.The Canadian Press