Market turmoil constrains complex debt issues: CRISIL

Market turmoil constrains complex debt issues: CRISIL

Mumbai: Uncertain market conditions, sliding share prices, tight liquidity and caution among lenders triggered a sharp drop in issuance of complex financial instruments last month, rating agency CRISIL said.

“Highly complex instruments are where you will have many more risk parameters, and in simple and complex instruments, the variables are far fewer," S. Venkataraman, CRISIL’s senior director, said.

“CRISIL’s analysis of debt issuances in November reveals an 80% decline in the issuances of ‘complex´ and ‘highly complex´ instruments in the course of just a month," a CRISIL statement said.

“Simple debt issues mainly comprised commercial paper, certificates of deposit, and non-convertible debentures with fixed coupons," it said.

The share of sophisticated ‘complex´ and ‘highly complex´ products declined to 18% in November, from 80% in the previous month.

“In November, very few highly complex instruments were issued," CRISIL said.

Highly complex issuances in October were mainly equity index- linked debentures and pass-through certificates related to securitisation deals. Equity-linked debentures are mainly targeted at wealthy individuals, while investors in PTCs are mostly mutual funds.