In case you have missed the evolving story of Indian filmmaker Eros International Plc (Listed in the U.S. under "EROS") over the last week, the company's US listed equity and its Bombay Stock Exchange listed main subsidiary have both been decimated as a result of ratings agency CARE recently downgrading the company to default, as a result of "delays or likely defaults in serving debt availed from banks".
"As per the management, the delays/default in debt servicing is on account of slowdown in collection from debtors leading to cash flow issues in the company," CARE said in a statement days ago.
Eros responded on June 6, stating: "As previously communicated through our Indian subsidiary, EIML was late on two loan interest payments for April and May 2019. These interest payments total less than $2 million and are currently in process of remittance."
But now, a new update from Bloomberg seems to lend credibility to the notion that the company may be in a precarious financial situation. Bloomberg says that Eros Worldwide FZ LLC, one of the founder entities of Eros International Media, has pledged an additional 38.45% stake in the Indian filmmaker as additional collateral for loans with Anand Rathi Global Finance, Avtar Instalments and Venus Asset Finance, bringing its total pledged stake pledged to 97%.
Eros Worldwide FZ LLC holds a 39.66% stake in U.S.-listed Eros International Plc and is also the top stake owner followed by 22.7% stake held by Eros Digital Pvt, according to BSE data.
Eros shares on Tuesday were limit down - again - in Bombay as a result of creditors and shareholders likely trying to hit the exit at the same time.
EROS made its way into the crosshairs of short sellers in 2016 and 2017, who claimed that the company was then in the midst of a liquidity crisis. At the time, Eros responded by retaining Kasowitz Benson Torres LLP and suing its critics in a case that was thrown out by New York State Court earlier this year.
The $EROS lawsuit against multiple short sellers was just dismissed.— Hindenburg Research (@HindenburgRes) March 13, 2019
Another win for free speech and another loss for those who wish to suppress critical market commentary.
Regardless, given the crippling of the company's equity, its CEO has maintained that the default rating was all due to administrative errors and that the company's credit rating would be restored within a matter of weeks.
$EROS CEO Kishore Lulla gave a masterclass on Bloomberg this morning on what NOT to say when investors are trying to figure out whether you're still missing bond payments:— Hindenburg Research (@HindenburgRes) June 10, 2019
"There are temporary cash flow issues sometimes"
"Sometimes a slowdown happens"https://t.co/9iTEtQyJQJ
The company put out a June 9 press release announcing a share repurchase program, calling its equity "seriously undervalued" and reiterating its "positive business fundamentals and strong financial position".
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