New Delhi

About one- fifth of the USD 7 billion worth FCCBs issued by Indian companies that are due for redemption in 2012 have an " extremely high likelihood" of default, ratings agency Fitch said.

In a report 'Indian FCCB Redemption in 2012: Quantifying the Problem'released today, Fitch also said that another 17 % of the FCCBs due this year are likely to undergo restructuring.

"... 20 % of Indias estimated USD 7 billion FCCBs due for redemption in 2012 have an extremely high likelihood of default. Another 17 % of the FCCBs due this year are likely to undergo restructuring, mostly maturity extensions," it said.

Fitch said that the rest 63 per cent of FCCBs due in 2012 have a high likelihood of redemption. The agencys report is based on an analysis of 59 companies whose FCCBs are due for redemption in 2012.

FCCBs are a special category of bonds which are issued in currencies different from the domestic currency issuing companys. Corporates issue FCCBs to raise money in foreign currencies.

According to the report, 19 of the companies have a high likelihood of default on their FCCB payments or restructuring the FCCBs with significant distressed debt features.

" In this group, at least eight have already defaulted in other debt obligations.

Given their significantly weakened cash flow, unsustainable debt levels and existing default status, the prospect of recovery actions by domestic lenders against a number of these companies is high," Fitch said. It added that in the event of default on FCCB payment, the recovery may be low given their unsecured nature.