Emerging market bonds struggle with regulatory standards

Author: Karry Lai | Published: 24 Feb 2020

According to in-house counsel, industry associations, ratings companies and private practice lawyers, regulatory scrutiny in India has created more due diligence work for bond issuers. However, as Indian deal volumes are due to grow in 2020 after a strong 2019, more attention needs to be paid to bond covenants and documentation gaps.

Indian debt capital markets had a good year in 2019 compared to previous years. More than $21 billion was raised by Indian corporates in the international bond market, compared to $7.4 billion in 2018 and $13.1 billion in 2017.

"A lot of Indian paper was sold in 2019, which was driven partly by regulatory changes," said Jitesh Shahani, partner at L&L Partners. For example, Indian non-banking finance companies (NBFCs) and banks are now allowed to raise foreign currency-denominated bonds. Indian corporates are now able to utilise foreign currency-denominated bonds to repay Indian rupee-denominated loans, for working...