Mahanagar Telephone Nigam (MTNL) has announced its inability to fund the escrow account for the upcoming semi-annual interest payment on its 7.87% Bond Series VII-B, due on 1st June 2026. The company cited insufficient funds as the reason for this shortfall.
According to the Structured Payment Mechanism outlined in the Tri-Partite Agreement between MTNL, the Department of Telecommunications (DoT), Ministry of Communications, Government of India, and Beacon Trusteeship Limited, MTNL is required to deposit the necessary funds into the escrow account maintained at the Bank of India at least 10 days before the due date.
Despite the bonds being Sovereign Guaranteed by the Government of India, MTNL’s failure to meet the funding requirement could lead to the invocation of the Sovereign Guarantee. In such an event, the Debenture Trustee would call upon the Government of India to fulfil the payment obligations on behalf of MTNL.
The Tri-Partite Agreement, which underpins these bonds, was previously filed with the Bombay Stock Exchange (BSE) when the bonds were listed. This agreement ensures that in the event of a default by MTNL, the Government of India is bound to cover the principal and interest payments.
MTNL’s disclosure highlights the financial challenges the company faces in meeting its debt obligations, despite the backing of a Sovereign Guarantee.
Disclaimer: This article is based on a regulatory filing submitted to the National Stock Exchange of India (NSE).