Blu-Smart Mobility's Partial Principal Payment Triggers Cross-Default: What’s Next?
26 February 2025 · Sachin Gadekar
Blu-Smart Mobility’s Partial Bond Repayment Triggers Cross-Default – What It Means for Investors and the Road Ahead
Understanding the Issue: Blu-Smart’s Technical Default Across ISINs
Blu-Smart Mobility recently faced a technical default due to partial payment of principal on a specific ISIN, leading to a cross-default across all its ISINs. The situation unfolded when the company failed to fully repay its obligations under ISIN - INE0B7Y07084, triggering a chain reaction across its entire debt structure.
Timeline of Events: What Led to the Default?
February 20, 2025 (Thursday):
A notice was sent to all debenture holders of Blu-Smart Mobility regarding a scheduled Debenture Holders’ Meeting.
The Debenture Trustee highlighted that the non-payment of INR 10 Cr (out of the INR 30 Cr due on February 3, 2025) under ISIN - INE0B7Y07084 had resulted in a default.
As per the cross-default clause in the Debenture Trust Deeds (DTDs), this default extended across all ISINs.
A virtual meeting was proposed for March 17, 2025, to decide on the course of action.
February 21, 2025 (Friday):
The Debenture Trustee initially recalled the message for undisclosed reasons.
However, a second mail was sent with similar details, reaffirming the default status.
Blu-Smart began clearing its outstanding dues to the debenture holders.
February 24, 2025 (Monday):
Blu-Smart acknowledged a delay in the INR 30 Crore bond repayment due to a temporary liquidity crunch.
The company assured investors that the issue was resolved and highlighted key financial improvements:
Debt at its lowest since early 2023.
Expected 80% YoY GMV growth in FY25.
Improved margins and reduced losses.
Continued focus on sustainable mobility with profitability projected in FY26.
What’s Next for Blu-Smart Mobility and Debenture Holders?
With the debenture holders’ meeting scheduled for March 17, 2025, stakeholders must decide:
Recognize the Event as a Default: If deemed a default, debenture holders may request immediate prepayment from Blu-Smart.
Maintain the Existing Repayment Schedule: If investors accept the explanation, repayments will continue as per the original schedule.
Key Takeaways for Investors
Cross-default clauses can significantly impact bondholders, even if partial payments are made.
Temporary liquidity gaps can lead to technical defaults, affecting investor sentiment.
The upcoming debenture holders' meeting will be crucial in determining Blu-Smart’s financial obligations and repayment structure.
Blu-Smart’s financial health is improving, but how investors respond to this technical default will shape its financial future. Stay tuned for further updates post the March 17 meeting.