Professional Documents
Culture Documents
CDR Master Circular 2012 PDF
CDR Master Circular 2012 PDF
SN
Contents
Pg No
Holding on operations
12
10
Monitoring Mechanism
14
11
Sharing of Securities
18
12
20
13
22
14
Payment Parity
28
15
29
16
30
17
32
18
Recompense Clause
33
19
OTS/Assignment of Debts
41
20
45
21
Re-workout/Re-entry in CDR
45
22
48
23
49
24
55
25
58
25
63
26
69
27
71
CDR Mechanism can be joined by all the banks and financial institutions. It can
also be joined by Non Banking Finance Companies (NBFCs), Asset
reconstruction Companies (ARCs), State Level Institutions (SLIs) and CoOperative Banks on transaction-specific basis.
2.
The Flash Reports and Final Restructuring Proposals should be circulated ten
days before and Review/Status Notes, seven days before the meeting of the CDR
Empowered Group (EG) to the Nodal Officers of all participating lenders.
2.2
2.3
2.4
All cases for which CDR Core Group has given in-principle approval for Reentry, Rework, entry of BIFR cases or cases of Wilful Defaulters should be
finalised and referred to CDR EG within 60 days of approval by CDR Core
Group.
2.6
Time frame for the execution of MRA/TRA: To avoid undue delay in execution
of MRA and TRA, following time frame is prescribed:
(i)
(ii)
3.
3.1
Referring Institution (RI) should ensure prima-facie viability of units at the time
of submission of Flash Report. Wherever necessary TEV study from independent
reputed agencies be conducted while drafting the final CDR package.
3.2
RI/MI may also examine the possibility of change of management while drafting
the final CDR package. If the case has been found to be adversely affected due to
incompetent management of the Company or where diversion/misuse of funds
has taken place, change of management should be the first option.
3.3
3.4
3.5
Conversion of debt into preference shares is not desirable and should be the last
option. Instead of preference capital, instruments such as convertible bonds
having security may be insisted upon.
3.6
3.7
3.8
Rate of interest for all facilities including FITL/WCTL should be minimum Base
Rate.
3.9
3.10
Wherever feasible, the Lead Bank/MI should nominate a director on the Board of
the Company.
4.
4.1
4.2
4.3
(i)
(ii)
(iii)
(iv)
Cost of Capital
(v)
Any Final Restructuring Proposal without the above aspects will not be taken up
for discussion at the CDR EG.
5.
5.1
Category I
The Category I CDR system is applicable to accounts, which are classified as
'standard' and 'sub-standard'. There may be a situation where a small portion of
debt by a bank might be classified as doubtful. In that situation, if the account
has been classified as standard/substandard in the books of at least 90% of
lenders (by value), the same would be treated as standard/substandard, only for
the purpose of judging the account as eligible for CDR, in the books of the
remaining 10% of lenders.
5.2
Category II
There have been instances where the projects have been found to be viable by the
lenders but the accounts could not be taken up for restructuring under the CDR
system as they fell under doubtful category. Hence, second category of CDR
would be there for cases where the accounts have been classified as doubtful in
the books of the lenders, and if a minimum of 75% of creditors (by value) and
60% creditors (by number) satisfy themselves of the viability of the account and
consent for such restructuring, subject to the following conditions:
(i)
It will not be binding on the creditors to take up additional financing worked out
under the debt restructuring package and the decision to lend or not to lend will
depend on each bank/FI separately. In other words, under the second category
5
of the CDR mechanism, the existing loans will only be restructured and it would
be up to the promoter to firm up additional financing arrangement with new or
existing creditors individually.
(ii)
All other norms under the CDR mechanism such as the standstill clause, asset
classification status during the pendency of restructuring under CDR, etc., will
continue to be applicable to this category also.
6.
6.1
ELIGIBILITY CRITERIA
(i)
Any one or more of the creditors who have minimum 20% share in either
working capital or term finance, or
(ii)
6.2
BIFR CASES
The guidelines also allow restructuring of large-value BIFR cases for
restructuring under the CDR system if specially recommended by the CDR Core
Group. As per the Core Group decision, one of the eligibility criteria for taking
up BIFR cases for restructuring under CDR Mechanism is minimum cut-off limit
of Rs.15 crore of aggregate outstanding exposure of Banks/FIs. The exposure
would exclude equity and preference shares subscribed to by FIs/Banks. Details
of eligibility criteria, financial parameters, etc. to be complied with in respect of
BIFR cases are given in Annexure II.
In case regulatory benefits are to be availed for such BIFR cases, then regular
financial parameters applicable to normal cases would be applicable to such
BIFR cases also, in addition to the stipulation that Profit After Tax should be
positive in 5 years.
6.3
Willful Defaulters
RBI in its guidelines on CDR mechanism has stipulated as under:
While corporate indulging in frauds and malfeasance even in a single bank will
continue to remain ineligible for restructuring under CDR mechanism as
hitherto, the Core group may review the reasons for classification of the
borrower as wilful defaulter specially in old cases where the manner of
classification of a borrower as a wilful defaulter was not transparent and satisfy
itself that the borrower is in a position to rectify the wilful default provided he is
granted an opportunity under the CDR mechanism. Such exceptional cases may
be admitted for restructuring with the approval of the Core Group only. The
Core Group may ensure that cases involving frauds or diversion of funds with
malafide intent are not covered.
In view of the above, details of eligibility criteria to be followed in respect of
cases of willful defaulters etc. are given in Annexure III.
6.4
7.
7.1
7.2
7.3
The Referring Institution should incorporate all applicable standard terms &
conditions in the restructuring package, besides special conditions deemed
necessary in specific cases. In case it is felt that a particular condition need not be
stipulated or should be suitably modified in a particular case, appropriate
justification should be given in the Final Report. In case changes in standard
condition are envisaged after approval of the final restructuring proposal, then
the same may be referred to CDR EG for approval and subsequent modification
of LOA.
7.4
As per the Debtor-Creditor Agreement (DCA) signed between the lenders and
the borrower for CDR purpose, it is obligatory on the part of the borrower to
abide by the terms of the package once it is approved by the CDR EG with supermajority. In order to ensure transparency, better compliance and expeditious
implementation of the package, it is necessary that the borrower is fully aware of
terms and conditions of the package as also special conditions stipulated therein.
8.
8.1
8.2
8.3
The Standing Members in the CDR Empowered Group will not have any voting
rights in respect of the matter specified in section 21.1 or section 21.2 unless the
institution they represent is also a Lender to the Eligible Borrower.
[Super-majority Vote as above mentioned is defined as follows:
Super-Majority Vote shall mean votes cast in favour of a proposal by not less
than sixty percent (60%) of number of Lenders and holding not less than seventyfive percent (75%) of the aggregate Principal Outstanding Financial Assistance.]
Lenders not having mandate at the time of CDR EG meeting could furnish their
stand shortly after the meeting but not later than the next meeting and their
stand if received by then should be taken into account for voting, and
Lenders not furnishing their stand before the next CDR EG meeting should be
excluded from voting.
In certain matters like right of recompense, pre-payment premium, sharing of
securities etc. (for original CDR debts) in which only the original CDR lenders
interests were required to be protected, the exposure of new lenders in the
account should not be included for counting 75% by value and 60% by number
of members for super majority vote, since after considering the voting power of
new lender(s), the decisions in the above matters would get affected. In all other
matters, exposure of all the CDR lenders, as at the end of previous quarter,
should be taken for the purpose of voting.
Once the Monitoring Institution presents the restructuring proposal and has
established the need for additional exposure and has been approved by CDR EG,
the same must be followed by all the participating lenders in without any
deviation. Conditional mandates and mandates not agreeing for need based
additional exposures would be treated as negative votes in respect of final
packages.
8.4
10
(i)
CDR cell shall issue LOA/convey the decision of CDR EG to the lenders on
approval of the minutes of CDR EG by the Chairman of CDR EG, with a
statement that LOA/decision of CDR EG is subject to confirmation of minutes at
the ensuing CDR EG meeting and any modification taken place at the time of
confirmation minutes would be advised separately.
(ii)
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8.6
The transaction-specific members are also permitted to attend that part of CDR
Empowered meeting pertaining to its case and also providing agenda/minutes
of CDR Empowered Group Meetings pertaining to the case specific.
9.
9.1
HOLDING ON OPERATIONS
The HOO is basically a short term measure to accommodate the genuine and
legitimate business needs of potentially viable units:
(i)
During HOO, the outstanding level (FB+NFB) as on the date of reference should
be maintained.
(ii)
The borrower-corporate should confine its banking facilities to CDR lenders only
in order to ensure financial discipline.
(iii) The interchangeability between FB and NFB limits to the extent of the
outstanding level as on the date of reference may be allowed.
(iv) Withdrawal to the extent of credits should be allowed during HOO irrespective
of Drawing Power (DP).
9.2
The members of CDR system are required to observe the above mentioned
operational guidelines during implementation of the package. It may, however,
be noted that in case there arises any conflict between these operational
guidelines and RBI guidelines, RBI guidelines shall prevail.
9.3
On admission of the Flash Report the borrower should open a current account
with the MI to be designated Pre-TRAaccount. The procedure would be as
under:
(i)
12
(ii)
All operational accounts of the borrower such as cash credit account / overdraft
account should immediately be frozen for the purpose of credits.
(iii) Self liquidating advances like BP / BD would not be covered under the Pre-TRA
account and the transactions pertaining to such facilities would continue with the
respective lender.
(iv) The lender operating the pre-TRA account shall not have the right of general or
specific lien on account balances. Such lender may only recover pre-determined
charges for operating such an account.
(v)
(vi) Every Flash report should contain estimated credits and cash budget for a period
of four months, which should include the operational expenses like payment of
salaries/wages, rent, statutory dues, purchase of raw material, payment towards
utility bills etc and other debits permitted by the lenders.
(vii) Every lender while obtaining sanction for admission of flash report shall also
seek sanction to authorise opening of Pre-TRA account with MI.
(viii) Debits on account of critical payments required to maintain asset classification as
on date of reference may be paid through this account, provided the same is
clearly mentioned in the flash report.
(ix) After date of reference, all forced debits like interest, instalments, devolved LCs
and invoked BGs shall be accounted for with respective lenders only. No amount
shall be debited to the new account.
(x)
13
10.
10.1
MONITORING MECHANISM
10.2
10.3
10.4
10.5
(i)
Till such time a restructuring package is sanctioned and fully implemented by all
lenders, the JLM/MC meetings should be convened by the Monitoring
Institutions generally once in a month and thereafter, at least once in every three
months. At least one JLM meeting every year should be held at the companys
plant.
(ii)
(vi) MC should discuss the outstanding issues between lenders/borrowercorporate/promoters and suggest remedial steps for their resolution.
15
(vii) MC should discuss and make recommendation on any other issue as may be
brought up by lenders/CDR EG.
(viii) MC should make recommendations on various proposals presented by
borrower-corporate including review of conditions/compliances/modifications.
(ix) MC
should
make
recommendations
on
appointment
of
Concurrent
(xi) Whenever larger issues such as those relating to sharing of charge, Working
Capital tie-up, expansion/modernization, etc are to be discussed, then all
participating lenders to the borrower-corporate including consortium members
should be invited to the MC meetings.
(xii) In cases where transfer/assignment of debt has been made by CDR members in
favour of non-CDR entities viz. Asset Reconstruction Companies, NBFCs,
investor funds etc., unless they have joined in the CDR system on transaction
specific basis, then such entities should also be invited to MC meetings. This
would enable the existing members and such new entities to understand each
others requirements and would foster greater co-operation so essential for the
success of the CDR packages.
(xiii) Any proposal for One Time Settlement, partial prepayment to CDR
members/non-CDR entities etc. should be referred by the borrower-corporate to
MC for discussion and recommendation to CDR EG for approval. Only on
receipt of CDR EG's approval, such settlements should be done.
(xiv) Minutes of the MC meetings should be circulated to all CDR members having
exposure in the particular case and to the company also. Besides, copies of the
Minutes should also be forwarded to nodal officers of all such CDR members.
16
(xv) All expenses for conduct of MC meetings are to be borne by the borrowercorporate and stipulation to this effect should be included in CDR LOAs. In
respect of past cases, the Monitoring Institutions should advise the concerned
borrower-corporate accordingly.
(xvi) CDR Cell can also convene Monitoring Committee meeting, where a meeting of
Monitoring Committee is not held for more than three months and even after
two-three reminders to Monitoring Institution, there is no prompt response and
especially when there is any issue required to be discussed amongst the MC
members/lenders. CDR Cell shall recover the expenses incurred in this regard
from Monitoring Institution/company.
10.7
Up to 100
2 (3)*
2.
101-500
15
5 (7.50)*
7.50
3.
501-1000
50
10 (15)**
10
4.
Above 1000
100
15 (22.50)**
20
17
(i)
One time contribution of Rs.4 lakh for referring each new case (referred after
December 15, 2010);
(ii)
One time contribution of Rs.1 lakh for each of the existing cases (referred before
December 15, 2010).
10.9
(i)
The package was sanctioned by the lender(s) concerned and effect had been
given in the books of account of the lender(s);
(ii)
Promoters contribution to the extent envisaged in the package had been brought
in; and
(iii) MRA was executed binding the lender(s) and the company for compliance of all
terms and conditions of the approved package.
There should not be any extraneous conditions at the time signing MRA by the
lenders, apart from the conditions mentioned in the approved CDR package.
11.
11.1
SHARING OF SECURITIES
11.2
11.3
11.4
Exclusive charge is defined as security charged with one lender and not a group
of lenders. Lenders having exclusive charge on a specific asset cannot be forced
to share their charge on the said security.
18
11.5
(i)
(ii)
If the purpose of such loans cannot be ascertained then the same may be treated
as funding for working capital and given a second or subservient charge on the
current assets of the Company. Their tenure should be as per the tenure of WCTL
sanctioned in the restructured package.
11.6
Asset Coverage Ratio (ACR) to be maintained at least at the level of 1 to take care
of regulatory provisions. Any shortfall in this to be made good by
borrower/promoter.
11.7
(i)
(ii)
(iii) Other formalities necessary for creation of charge shall be completed by the
Monitoring Institution.
(iv) Pledge Agreement, Deed of Hypothecation etc. to be obtained from the
concerned borrowers in prescribed formats shall be communicated to the
borrowers by the Monitoring Institution.
(v)
19
(vi) The entire process of creation of charge should be completed within 90 days from
the date of Letter of Approval (LOA) issued by CDR Cell. Delay on the part of
any lender/borrower shall attract provisions applicable to non-compliant lenders
as per the ICA/MRA
(vii) Creation of security being critical part of implementation of package, the same
should normally be completed within three months from the date of LOA. In
case the same is not completed/likely to be completed within the said period,
Master Restructuring Agreement (MRA) should be executed with specific time
line for completion. MRA should also contain a clause on lenders agreement
regarding action to be taken for non-compliance.
(viii) While security creation is important for implementation of CDR packages,
continuity of a viable CDR package also needs to be ensured by lenders, while
insisting on sharing the security.
(ix) Security Trustee/agent can also be appointed for carrying out the task of security
creation on behalf of lenders as per the approved CDR package. The other
related conditions can also be stipulated to smoothen the process of appointment
of security trustee/agent, such as Power of Attorney/letter of authority by the
borrower to security agent/trustee for creation security in terms of approved
CDR package, recovering all the charges for appointment of the security
agent/trustee and fees for services rendered from the borrower and to execute
inter-se Agreement between the lenders and the company apart from security
trustee Deed.
12.
12.1
20
outstanding beyond seven years from the date of restructuring into equity
should be stipulated as under. This would also provide an opportunity for the
lenders to share the upside.
(i)
Lenders shall have the right to convert up to 20% of the loan outstanding
(interest-bearing term loan) beyond seven years into equity at any time after
seven years from the date of Letter of Approval issued by CDR Cell.
(ii)
Such conversion shall be as per the guidelines issued by Securities & Exchange
Board of India (SEBI) from time-to-time/or as per the applicable loan covenants.
Normally, there shall not be any restriction on sale of equity shares acquired by
lenders through conversion option except point iv above.
12.2
Having regard to the merits of converting part of the dues/sacrifices into equity
and general experience of share prices of CDR cases, banks might consider
conversion into equity on a case-to-case basis adopting the following approach.
(i)
Conversion into equity will not be compulsory and lenders will have the option
to take suitable debt instruments in lieu of equity, keeping in view their internal
policy guidelines.
21
(ii)
(iii) The zero/nominal interest rate on such instruments shall be reviewed after three
years from the date of Letter of Approval issued by CDR Cell and thereafter once
every three years having regard to the profitability of the company. In the event
a decision is taken to charge higher rate of interest, borrowers may be allowed to
prepay the zero/nominal coupon instrument, if they so desire.
(iv) Conversion of the defaulted amount or outstanding amount of long term
zero/nominal interest instrument into equity shall be in terms of SEBI
guidelines/loan covenants, as may be applicable.
13.
Any additional exposure over and above the exposure on the Cut-off-Date will
be considered as additional finance.
13.1
(i)
(ii)
These are essential for achieving the projected cash flow for viability of a
package.
(iii) Need Based Working Capital - Assessment, Sanction and Disbursement:
a)
Loan installments of working capital lenders would get priority to the extent of
additional working capital facilities extended by them, in case there is no
outstanding balance of WCTL & FITL.
(iv) Assessment of Need Based Working Capital and factoring of the same in Final
Restructuring Package: The guiding principles for assessing and factoring of
Need Based Working Capital (WC) in the Final Restructuring Package are as
under:
(a)
At the time of admission of the Flash Report, the company should submit
CMA data to lead working capital banker (or the banker having highest exposure
in WC limits in case of multiple banking arrangement) for expediting the
assessment of WC limits before preparation of the Final Report.
23
(b)
availability of the latest audited financials. If latest audited statements are not
available, WC should be based on provisional/unaudited financials.
(c)
The lender should sanction their share of WC limits without waiting for
The other Commercial Banks, which had extended only Term Loans, may
add any conditions beyond the conditions deliberated and approved by CDR EG.
24
(k)
Need based WC for first year should be assessed and incorporated in CDR
package.
a)
Lenders to give commitment for need based WC limits for the second year
of operations.
b)
Even though commitment of need based WC for the second year will be
already sanctioned their respective share in WC may release their limits instead
of waiting for 100% tie up.
d)
25
In Category-I CDR cases, the creditor, (outside the minimum 75% of value
and 60% in number) for any internal reason, does not wish to commit additional
finance, then such creditor can either (a) arrange for its share of additional
finance to be provided by a new or existing creditor, or (b) agree to the
deferment of the first years interest due to it after the CDR package becomes
effective. The first years deferred interest as mentioned above, without
compounding, will be payable with the last installment of the principal due to
the creditor.
(b)
In addition, the exit option will also be available to all lenders within the
The lenders who wish to exit from the package would have the option to
sell their existing share to either the existing lenders or fresh lenders, at an
appropriate price, which would be decided mutually between the exiting lender
26
and the taking over lender. The new lenders shall rank on par with the existing
lenders for repayment and servicing of the dues since they have taken over the
existing dues to the exiting lender.
(d)
In order to bring more flexibility in the exit option, One Time Settlement
13.3
(i)
The approach for priority for additional finance under CDR would be as under:
Superior status will be accorded to any fresh assistance extended to the corporate
as part of the package towards minimum required capital expenditure, pressing
creditors, VRS, etc.
(ii)
In the case of WCTL and FITL (past & future) of working capital, priority claim
will be limited to the extent of fresh working capital exposure envisaged at the
time of approval of the package. In case fresh sanction/release of WC is more
than WCTL component then priority will be limited to WCTL/FITL component.
(iii) Unutilized sanction of working capital will not qualify for preferential claim.
27
(vi) Replacement financing raised by companies for OTS with existing lenders would
qualify the new lenders to step in the shoes of the existing lenders. Accordingly,
if original lenders debt did not have priority status then the new lenders also
will not get it. EG may, therefore, accord priority status in cash flow in different
ways in different circumstances specially where dealing with BIFR/doubtful
cases or cases where fresh investment by strategic/stressed funds is envisaged.
14.
PAYMENT PARITY
28
14.1
The extent of recovery of dues from the borrowers before the date of reference to
CDR has been a contentious issue. While lenders who are not able to recover as
much as others, generally demand that the package be prepared in such a way
that parity was brought about with such lenders who had recovered higher dues
before the date of reference to CDR, the lenders who had recovered higher dues,
feel that this would act as a disincentive for efficient recoveries by some lenders.
Taking into account the fact that it would not be practicable to re-open the issue
of past recoveries made by some lenders and to bring all lenders at par before
restructuring, any disproportionate recoveries after the date of reference only
shall be corrected in such a way that all the lenders are at par.
15.
15.1
Extent of recovery of dues from the cash flow in the TRA has been an issue
between the lenders. Interest on the working capital is paid first as the same is
treated as part of operational expenses. In normal times, both WC lenders and
term lenders get their interest payments. However, in case of shortfall in cash
flow, the term lenders do not get any payment. In order to take care of such
concerns, the following approach should be adopted:
(i)
(ii)
In all existing and future cases, where such pooling of security is not envisaged
(i.e. WC- FB/NFB- is secured by current assets and TL/WCTL/FITL is secured
by fixed assets separately), the present system i.e. priority for payment of interest
29
Opening of Pre-TRA & TRA account should be expedited in all CDR cases. It
should be operational within one month from the approval of the case. In case
TRA arrangement is not created/working properly, the TRA account should be
shifted to the next largest banker within 3 months of becoming aware of the
problem.
16.
16.1
(i)
The dues to the bank are fully secured. The condition of being fully secured by
tangible security will not be applicable in case of infrastructure projects,
provided the cash flows generated from these projects are adequate for
repayment of advance, the financing banks have in place an appropriate
mechanism to escrow the cash flows, and also have a clear and legal first claim
on these cash flows.
Fully secured: When the amounts due to a bank (present value of principal and
interest receivable as per restructured loan terms) are fully covered by the value
of security, duly charged in its favour in respect of those dues, the bank's dues
are considered to be fully secured. While assessing the realisable value of
security, primary as well as collateral securities would be reckoned, provided
such securities are tangible securities and are not in intangible form like
guarantee etc., of the promoter/others. However, for this purpose the bank
guarantees, State Government Guarantees and Central Government Guarantees
will be treated on par with tangible security.
30
(ii)
(iii) The repayment period of the restructured advance including moratorium period,
if any, doesnt not exceed 15 years in the case of infrastructure advances and 10
years in the case of other advances.
(iv) Promoters sacrifice and additional funds brought by them should be minimum
of 15% of the banks sacrifice.
(v)
Personal Guarantee is offered by the promoter except when the unit is affected
by the external factors pertaining to the economy and industry,
(i)
Sacrifices of lenders should be computed from the cut-off date in the package.
(ii)
(iii) 50% of 15% of sacrifices of lenders should be brought up-front by the promoters.
31
sacrifice within the extended time limit of one year, the asset classification
benefits derived by banks will cease to accrue and the banks will have to revert
to classifying such accounts as per the asset classification norms specified under
para 11.2 of this circular.
c)
Reduction in value of equity from the face value of equity capital owing to derating would be treated as sacrifice.
17.
32
17.1
Some of the corporates whose liabilities are restructured under the CDR
Mechanism, may turn around faster than envisaged and may be in a position to
contract loans from outside the existing CDR lenders at lower rates and may be
in a position to prepay the existing debts in part or full. The following criteria
should, therefore, be adopted for prepayment under CDR:
(i)
Prepayment of debt in part or full shall be on the basis of mutual agreement and
subject to approval of CDR EG.
(ii)
In case of part-prepayment, the same shall be made to all lenders and in respect
of all loans (including WCTL, FITL) on pro-rata basis, irrespective of the interest
rate.
(iii) Such prepayment should be encouraged and prepayment penalty should not be
charged in CDR approved cases whether it is OTS/Negotiated Settlement (NS);
or it is at the instance of lenders pursuant to acceleration clause.
18.
RECOMPENSE CLAUSE
Ordinarily, every package under the CDR involves waivers and scarifies on the
part of lenders. It is also the practice under CDR to stipulate a standard
Recompense clause in the restructuring package. The guidelines issued by RBI
clearly envisage the right of recompense based on the certain performance
criteria.
For the purpose of the guidelines, Recompense means recouping, whether fully
or partially, the sacrifice made by the lenders as also waivers/concessions/reliefs
given by the CDR Lenders to the borrower pursuant to the approved CDR
package.
18.2
18.3
The following items shall not be taken into computation of recompense amount:
18.3.1 Waiver of penal interest/liquidated damages: Waiver of penal interest/
liquidated damages as on Cut-off date as per CDR package will not be reckoned
for computation of recompense.
18.3.2 Sacrifices/waivers allowed prior to CDR restructuring: Any sacrifices/waivers
allowed by the lender(s) prior to CDR restructuring will not be reckoned for
computation of recompense under CDR mechanism. Any undertaking given by
the company to a lender for recouping the sacrifices/waivers prior to CDR
restructuring, will be outside the purview of CDR system.
18.3.3 Conversion of debt into equity/convertible debt instruments: In case part of
principal or interest dues are converted into equity/instruments convertible into
equity at a future date, the same will not be reckoned for computation of
recompense.
However, if there is no upside i.e. increase in market value of shares vis--vis the
conversion price at which the debt was converted into equity, the promoter
should undertake to buy-back the shares so allotted at the conversion price or
reimburse/recompense for the loss incurred on conversion into equity.
In case of optionally convertible instruments, recompense would depend on
conversion option exercised by the lender. If the lender does not opt for
conversion into equity, the treatment of the debt instrument will be similar to
conversion into non-convertible instrument as given at Para 2 (c) above
18.3.4 Reduction in LC/BG commission, etc.: Since charging of commission on
issuance of LCs and BGs is decided by the Working Capital consortium, the
recompense on reduction of commission will not fall under purview of CDR.
However, any reduction in commission envisaged in the CDR restructuring
package will be reckoned for recompense computation.
18.4
Non-applicability of Recompense:
35
18.5.1 Exit of the Case: The exit of the borrower from CDR mechanism, either
voluntarily or at the end of the restructuring period.
18.5.2 Improved Performance: Average EBIDTA for two consecutive financial years is
in excess of twenty-five percent of average EBIDTA of the relevant years as per
CDR projections. However, in case of improved performance of a company
under BIFR, recompense amount will be collected only after the net worth
becomes positive.
18.5.3 Declaration of Dividend: If the borrower declares dividend in any financial year
in excess of ten percent on annualized basis, recompense will be triggered.
18.5.4 Capex: If the borrower desires to incur any capital expenditure other than
envisaged in the CDR restructuring package out of internal accruals/issuance of
equity and preference share capital, payment of recompense will be triggered.
However, certain essential capital expenditure like exigencies on account of
breakdown of machinery, compliance of pollution control norms or other norms
fixed by Govt. /statutory authorities, etc. will not trigger recompense.
36
18.5.5 Extra- Ordinary Income: - Any windfall profit or excess profit derived from the
sale of assets, divestment, success in litigation, etc should also trigger the
recompense clause and the quantum of recompense amount should be linked to
such amount received by the company.
18.5.6 Liabilities of one of the lenders get refinanced by new lender(s) at the instance
of the company: - Right of recompense would be protected only if the lender was
forced to exit the company without its consent.
18.6
Sr. Concessions
Methodology of Recompense computation
No. considered by lenders
i. Principal Waiver
ii. Waiver of interest dues 100% of interest dues waived should be recovered
as recompense.
iii. Reduction of interest Interest sacrifice should be considered as
rate on principal debt difference in interest as per CDR package and
interest based on average of BPLR plus the
appropriate term premium and credit risk
premium of four major lenders (all, if the number
of lenders is less than four) prevailing as at the
end of each financial year (including broken
period, if any) after the cut-off date or the
document rate, whichever is lower.
iv. Conversion of debt In
case
of
conversion
of
principal
into Debentures and outstanding/interest dues into debentures and
Preference Shares
preference shares, sacrifice in interest/coupon rate
37
18.7.1 Based on the quantum of recompense determined as per Para 6 above, CDR EG
shall decide the form in which recompense amount can be recovered based on
cash-flow of the company. Full amount of recompense shall be recovered by way
of cash to the extent of Available Cash Surplus (defined at Para 7 (b) below) and
balance amount shall be recovered in the form of debt instruments/equity or
other suitable instruments like preference shares, etc.
The debt instrument, issued towards recompense, can be unsecured to avoid
deterioration of FACR. The debt instrument shall carry coupon/interest rate at
BPLR of respective lender. The repayment of debt instrument will be fixed by the
CDR EG at the time of deciding recompense. The individual lender may allow
the company to prepay such debt instrument on request of the company.
38
FY20XX Actual
39
From the Cash Surplus as calculated above for each completed year of
restructuring (till the year of trigger event for recovery of recompense), following
deductions can be made to arrive at AVAILABLE CASH SURPLUS for
recompense:
(i)
Margin requirement for incremental term loan for the next one year (as per the
CDR approved package);
(ii)
Margin requirement for incremental working capital for the next one year
(as
18.9
40
(ii)
The cases settled in the past on the basis of extant policy shall not be reopened.
(iii) These guidelines shall apply to all cases pending for determination of
recompense amount.
The exceptional cases, like packages involving change in management and/or
any deviation from the above recompense policy, may be referred to the Core
Group.
19.
19.1
OTS/ASSIGNMENT OF DEBTS
41
19.1.3 EG may allow use of part of internal accruals for OTS on case-to-case basis if such
terms are attractive from other lenders point of view specially with respect to
asset coverage, improving margin for WC, improved rating due to better balance
sheet etc.
19.1.4 OTS for WC Banks should be available for both WC & TL. However, WC banks,
if they so desire, might continue with WC facility. On completion of OTS,
existing security (incl. collateral security) charged to the outgoing CDR lenders,
as also non-CDR lenders should be given to the remaining CDR lenders. In such
cases the company may request for release of collateral which might be
considered by CDR EG based on conduct of the account/compliances of CDR
package etc. and the company should not transfer/assign/encumber them
without the prior approval of CDR EG.
19.1.5 As regards any security available with outgoing non-CDR lenders, company
should undertake that pursuant to OTS payment such security would first be
offered to CDR lenders and on completion of OTS a specific request to EG could
be made for its release.
19.1.6 There have been proposals where replacement financing is being arranged from
NBFCs, venture capital or External Commercial Borrowings. In such cases, the
new lenders will step into the shoes of the outgoing lenders and, therefore,
would get same security structure and rights and obligations available under
CDR package. Such new lenders would get priority to the extent the debt so
arranged is utilized to meet additional fund requirement as per the CDR
package. However, the remaining debt arranged for replacing the existing
lenders may not be given priority. In cases where debt level in a borrower
account is very high, EG on a case-to-case basis, may approve limited priority to
such new lender provided replacement debt is on better terms or there are other
considerations such as settlement/legal issues with non-CDR lenders, etc. As far
as possible such priority should be avoided.
42
19.2
ASSIGNMENT OF DEBT
19.2.1 Assignment of debt means transfer of debt at the option of individual lenders.
19.2.2 Lender may transfer or assign, in part or the whole of its outstanding Financial
Assistance. However, if any Reference is made or any Restructuring Scheme is
under preparation and/or implementation, such transfer or assignment shall be
subject to following:
43
(a)
The Lender (Transferor) giving a prior notice to the CDR Cell of the
proposed transfer.
(b)
status of the Restructuring Scheme including any previously decided issues not
subject to renegotiation. Transfer should take place before reference/admission
of the case in CDR or only after four months from the date of issuance of LOA by
CDR Cell i.e. after implementation of the package.
(c)
the package. The transferee would get the same security/rights under the
package as were available to the transferor/assignor.
(d)
In case of non-CDR members who are eligible but not joined CDR system
so far should get themselves admitted in the CDR System and issue a letter of
accession to this Agreement i.e. to execute transaction specific ICA or join the
system in the form Part A or Part B provided in Schedule-II, as may be required.
19.2.3 In case the assignment is in favour of a non-CDR member who at present is not
eligible to become a member of CDR. In addition to the clause (a) to (d) as stated
in Para 19.2.2, the following would be applicable:
a.
Any lender can assign/transfer debt to any entity who is, at present, not
applicable.
44
20.
20.1
21.
21.1
RE-WORKOUT/RE-ENTRY IN CDR
As per the revised RBI guidelines, regulatory benefits would be available to CDR
cases only if restructuring is done under CDR for the first time and meets the
following criteria
(i)
(ii)
(iii) The repayments does not exceed 15 years in case of infrastructure advances and
10 years in case of other advances
(iv) Promoters sacrifice and additional funds brought by them shall be minimum
15% of banks sacrifice
(v)
45
46
21.4
Other variations
Any changes in the terms of restructuring which do not result in reduction in the
present value of the loan (principal plus interest cash flows) or the advance being
rendered partially/fully unsecured need not be treated as second restructuring.
21.5
Where a debt restructured under CDR mechanism in the past stands fully
Where the debt restructured earlier under CDR mechanism is not the
22.
22.1
22.2
full
repayment/refinance,
the
company
may
exit
subject
to
48
Annexure I
FINANCIAL VIABILITY PARAMETERS
(To be included in Final Restructuring Proposals)
1.
1.1
The Return on Capital Employed (ROCE) reflects the earning capacity of assets
deployed. ROCE is expressed as a percentage of total earnings (return) net of
depreciation to the total capital employed. Total Earnings is PBT plus total
interest plus lease rentals.
1.2
Capital Employed is the aggregate of net fixed assets excluding capital work in
progress, lease rentals payable, investments, and total current assets less
creditors and provisions.
1.3
Normally, intangible assets are excluded for calculation of ROCE. Having regard
to the fact that stressed standard assets as well as sub-standard and doubtful
assets are considered for restructuring, it may be possible that fixed assets in
such cases might be depreciated to a large extent due to accounting practices
although the facilities might not have been utilized. Similarly, interest on loans
accrued and fallen due but not paid, might have been used to finance cash losses.
In other words, the fund is reinvested in the project. These normally get reflected
in accumulated loss, which is treated as intangible asset. Therefore, while
working out the total capital employed, suitable adjustment may be made for
unabsorbed depreciation and unserviced interest to lenders.
1.4
49
2.
2.1
The Debt Service Coverage Ratio (DSCR) represents the debt servicing capability
of the borrower. In the normal course, DSCR is the ratio of gross cash available to
meet the debt-servicing requirement. Gross cash available is the sum of gross
cash accrual plus interest on term debt plus lease rentals. Debt servicing
requirement is sum of repayment of term debt, interest on term debt plus lease
rent payable.
2.2
Available Cash Flow (ACF) will be net cash position during the year (total gross
profit plus outside funds if any available less total requirement including buildup of inventory/debtor/normal capital expenditure etc.) repayment of public
deposits should be included for calculation of DSCR.
2.3
The adjusted DSCR should be >1.25 within the 7 years period in which the unit
should become viable and on year-to-year basis DSCR to be above 1. The normal
DSCR for 10 years repayment period should be around 1.33:1.
50
3.
3.1
The Internal Rate of Return (IRR) is computed as the post-tax return on capital
employed during the project life based on discounted (net) cash flow method.
Cash outflows each year would include capital expenditure on the project and
increase in gross working capital. Cash inflows each year would include inflows
from the operations of the project each year, recovery of working capital in the
last year of project life and residual value of capital assets in the last year of
project life.
3.2
While the above definition may be relevant for project finance, for restructured
cases, the investment would have already taken place and the fixed assets would
have depreciated to a large extent for such existing cases. While the year of
restructuring could be considered as the zero year, aggregate of net fixed assets,
net working capital and investments could be treated as total assets deployed.
Cash inflows would have the same definition as for project finance. Project life
should be considered as 15 years irrespective of the vintage of the facilities but
depending on economic life.
3.3
Cost of capital is the post-tax weighted average cost of the funds employed. Since
the basic purpose of the restructuring exercise is to recover the lenders dues, it is
felt that zero cost could be assigned to equity funds (equity and reserves). Cost to
be assigned to the debt would be the actual cost proposed in the restructuring
package. Calculation of tax shield for the purpose of working out the effective
cost of debt funds will be as per usual institutional guidelines.
3.4
The benchmark gap between Internal Rate of Return and Average Cost of Funds
should be at least one percent.
51
4.
Extent of Sacrifice
The term 'bank's sacrifice' means the amount of "erosion in the fair value of the
advance", to be computed as per the methodology enumerated in para 11.4.2 (i)
of RBI Master Circular dated July 2, 2012.
Diminution in the fair value of restructured advances:
(i) Reduction in the rate of interest and/or reschedulement of the repayment of
principal amount, as part of the restructuring, will result in diminution in the fair
value of the advance. Such diminution in value is an economic loss for the bank
and will have impact on the bank's market value of equity.
For this purpose, the erosion in the fair value of the advance should be
computed as the difference between the fair value of the loan before and after
restructuring. Fair value of the loan before restructuring will be computed as the
present value of cash flows representing the interest at the existing rate charged
on the advance before restructuring and the principal, discounted at a rate equal
to the bank's BPLR or base rate1 (whichever is applicable to the borrower) as on
the date of restructuring plus the appropriate term premium and credit risk
premium for the borrower category on the date of restructuring. Fair value of the
loan after restructuring will be computed as the present value of cash flows
representing the interest at the rate charged on the advance on restructuring and
the principal, discounted at a rate equal to the bank's BPLR or base rate
(whichever is applicable to the borrower) as on the date of restructuring plus the
appropriate term premium and credit risk premium for the borrower category on
the date of restructuring.
The above formula moderates the swing in the diminution of present
value of loans with the interest rate cycle and will have to follow consistently by
banks in future.
52
(ii) In the case of working capital facilities, the diminution in the fair value of the
cash credit/overdraft component may be computed as indicated in para (i)
above, reckoning the higher of the outstanding amount or the limit sanctioned as
the principal amount and taking the tenor of the advance as one year. The term
premium in the discount factor would be as applicable for one year. The fair
value of the term loan components (Working Capital Term Loan and Funded
Interest Term Loan) would be computed as per actual cash flows and taking the
term premium in the discount factor as applicable for the maturity of the
respective term loan components.
(iii) In the event any security is taken in lieu of the diminution in the fair value of the
advance, it should be valued at Re.1/- till maturity of the security. This will
ensure that the effect of charging off the economic sacrifice to the Profit & Loss
account is not negated.
(iv) The diminution in the fair value may be re-computed on each balance sheet date
till satisfactory completion of all repayment obligations and full repayment of the
outstanding in the account, so as to capture the changes in the fair value on
account of changes in BPLR or base rate (whichever is applicable to the
borrower), term premium and the credit category of the borrower. Consequently,
banks may provide for the shortfall in provision or reverse the amount of excess
provision held in the distinct account.
5.
5.1
Break-Even Analysis
5.1.1
Break-even analysis should be carried out. Operating and cash break-even points
should be worked out and they should be comparable with the industry norms.
5.2
5.2.1
53
corporate in relation to the industry. Gross Profit Margin (GPM) for the industry
as a whole, to which the company belongs, is available in published
documents/databases (like 'Cris-Infac', 'Prowess' or similar database ventures).
Wide variation, if any, of companys GPM from the industry average would be
required to be explained with qualitative information.
5.2.2
5.3
5.3.1
The discounting factor may be the average yield expected by the lenders on the
total liabilities, or alternatively, the benchmark ROCE. This ratio is similar to the
DSCR based on the modified method (Actual Cash Flow method). In project
financing, sometimes LLR is used to arrive at the amount of loan that could be
given to a corporate. On the same analogy, LLR can be used to arrive at
sustainable debt in a restructuring exercise as also the yield. A benchmark LLR of
1.4, which would give a cushion of 40% to the amount of loan to be serviced, may
be considered adequate.
54
Annexure- II
BIFR CASES: ELIGIBILITY CRITERIA, FINANCIAL VIABILITY PARAMETERS,
AND PROCEDURAL ASPECTS
1.
ELIGIBILITY CRITERIA
1.1
1.1.1
1.1.2
BIFR has declared the company as sick and ordered workout of DRS.
1.1.3
1.2
1.2.1
Cases for which Special Investigative Audit (SIA) has been recommended by
BIFR.
1.2.2
1.2.3
Cases where Appeal against the decision of BIFR has been filed by any one of the
parties with AAIFR/Court.
2.
2.1
The restructuring scheme should enable the companys net worth to turn
positive in a time span of not more than 3-4 years.
2.2
2.3
55
2.4
The Corporates EBIDTA should become positive in two years and it earns net
profit within 4-5 years.
2.5
In case regulatory benefits are to be availed for such BIFR cases, then regular
financial parameters applicable to normal cases would be applicable, in addition
to the stipulation that PAT should be positive in 4-5 years.
3.
PROCEDURAL ASPECTS
3.1
The referring institution should prepare the Flash Report in the CDR format for
submission to the CDR Core Group. It should also indicate the compliance
position of the stipulated eligibility criteria. In case of any variation/relaxation,
suitable justification should be given for Core Group's deliberation in the overall
interest of all concerned.
3.2
The objective of considering the scheme under CDR should be to sort out issues
between FIs/Banks expeditiously so that the scheme can be put in place within
45/60/90 days. As such, proposals involving consent/approvals from non-CDR
members/Government agencies, which are critical for the viability of the
company, may not be encouraged.
3.3
3.4
The Flash Report in the prescribed format should be submitted to CDR EG for
approving admission of the case to CDR and usual procedure should be adopted
thereafter.
3.5
56
The approval of the restructuring scheme will be subject to final clearance of the
scheme by BIFR. After issuance of LOA by the CDR Cell, the scheme should be
submitted to BIFR by the referring institution/OA so that BIFR approval can be
obtained at the earliest and the scheme is implemented.
3.7
3.8
Lenders might implement CDR package after the same is filed with BIFR for
approval.
3.9
3.10
3.11
In terms of SICA, BIFR is expected to give its decision u/s 19A within 60 days. If
BIFR approval u/s 19A is available, the lenders including working capital banks
should release need-based working capital. However, the lenders shall not be
compelled if BIFR approval is not in place. CDR EG may consider any deviation
in the procedure on a case-to-case basis. There would also be priority in cash
flow for such additional funding for working capital lenders as per CDR
guidelines.
57
Annexure- III
CASES OF WILFUL DEFAULTERS: ELIGIBILITY CRITERIA,
FINANCIAL VIABILITY PARAMETERS PROCEDURAL ASPECTS
1.
1.1
RBI in its guidelines (issued on July 2, 2012), a "wilful default" would be deemed
to have occurred if any of the following events is noted :-
(i)
(ii)
(iii)
(iv)
The unit has defaulted in meeting its payment / repayment obligations to the
lender and has also disposed off or removed the movable fixed assets or
immovable property given by him or it for the purpose of securing a term loan
without the knowledge of the bank/lender.
2.
(i)
58
(iii)
The borrower should thereafter be suitably advised about the proposal to classify
him as wilful defaulter along with the reasons therefor. The concerned borrower
should be provided reasonable time (say 15 days) for making representation
against such decision, if he so desires, to a Grievance Redressal Committee
headed by the Chairman and Managing Director and consisting of two other
senior officials.
(iv)
Further, the above Grievance Redressal Committee should also give a hearing to
the borrower if he represents that he has been wrongly classified as wilful
defaulter.
(v)
3.
RBI vide its circular no RBI/2012-13/43 dated July 2, 2012 advised Banks / FIs to
initiate the measures against wilful defaulters as indicated in the circular.
4.
4.1
Cases of reported siphoning of funds or misfeasance, fraud, etc. (as one of the
reasons for wilful default) are prima-facie not eligible to be covered under CDR.
4.2
long-term basis. However, if after due diligence, it is felt that such promoters are
not dependable for long term relationship, then in such cases, OTS or change in
management would be required to address the issue of wilful default. If both are
not possible, such cases should be kept out of CDR.
5.
5.1
Before referring any case, the referring institution should check the lists of wilful
defaulters, which are maintained and updated by RBI/CIBIL from time-to-time
based on reporting by FIs/banks, to verify whether any FI/bank has reported the
company as wilful defaulter.
5.2
5.3
The objective should be only to collect the relevant information and not to sit in
judgment whether the action of the concerned lender(s) of reporting as wilful
defaulter was correct or not. The remedy for addressing the issue of wilful
default in a particular case should generally be found based on discussions with
other participating FIs/banks and the borrowers.
5.4
60
However, it would be desirable that they fall in line with the CDR package
without any special bucket. In case additional cash flows are required for
settlement with such lenders, the promoters should arrange the same.
5.5
The Referring Institution should prepare the Flash Report in the CDR format for
submission to the CDR Core Group, also indicating details of reporting as Wilful
Defaulter, gist of discussions at joint lenders meetings, justification for
considering the case of wilful defaulter under CDR, time schedule for referring
the Flash Report to CDR EG and finalising the restructuring package etc.
5.6
In case the reason for reporting as wilful defaulter is diversion of funds, use of
debt for purposes other than intended, use of long-term funds for short-term
purposes or vice-versa or from one group company to other etc., then following
course of action may be adopted.
(a)
If the funds have been utilized by the group company/associates and subsidiary
company or company under the same management, then such funds may be
brought back in a time-bound manner to the TRA of the main company.
(b)
In case such funds were used for some other purposes such as investment, stock
market operations, meeting capital expenditure, meeting cash losses, making
payments to other lenders, etc., it may be difficult to bring back such funds. In
such situations, promoters may have to come up with alternative proposals
including bringing funds from their other sources. As mentioned above, if based
on investigate audit, super-majority of lenders feel that it is a case of siphoning
of funds, then in such a case remedy is only to get the funds back from
promoters other sources. However, in such situations, continuing with the same
management need to be looked into.
(c)
In any case, under both situations (a or b above), the objective is to get the funds
back into the companys TRA in a time-bound manner. The funds could also be
brought back by way of sale of assets or investments. If such assets are created in
61
other group company, then lenders of the concerned company may have to
agree for it.
(d)
As promoters are the common thread for such past actions, the responsibility for
finding a remedy for wilful default should lie with the promoters and they must
give a suitable undertaking for the same.
(e)
After considering the proposal for bringing back diverted funds into the TRA,
decision regarding redistribution thereof may be left to CDR EG.
5.7
5.8
5.9
5.10
It is also felt that super-majority vote cannot be used to force some lenders to
withdraw the companys name from the list of wilful defaulters.
5.11
There are some existing CDR cases approved before the RBI clarification on
considering cases of wilful defaulter under CDR. In such cases; names of the
corporate borrowers have not been withdrawn from the list of wilful defaulter
as yet. The concerned lenders should withdraw such names forthwith.
62
Annexure IV
A. STANDARD CONDITIONS TO BE STIPULATED IN ALL CDR CASES
INCLUDING BORROWER CLASS A
1.
2.
The Promoters shall pledge their entire shareholding in favour of the Lenders in
demat form with voting rights. In case of issuance of fresh Equity Shares or
similar instruments carrying voting rights, they would also be pledged in favour
of the lenders.
3.
The Borrower shall procure and furnish an Undertaking from the promoters to
bring additional funds for meeting any cash flow shortage to service lenders'
debt/interest, if required by CDR EG.
4.
5.
The Borrower/CDR Lenders shall file Consent Terms, in respect of any pending
dispute or litigation before debt recovery tribunal/courts where recovery
application/suit is pending.
6.
The company shall broad base its Board of Directors and strengthen
Management set up by inducting outside professionals to the satisfaction of
Lenders.
7.
The company shall not effect any change in management set up without prior
permission from CDR EG.
8.
The Borrower shall not incur any capital expenditure save and except those
permitted in terms of the CDR package without prior approval of CDR EG.
63
9.
The Borrower shall not sell any of its fixed assets/investments save and except
those permitted in terms of the CDR package, without prior approval of CDR EG
and shall furnish requisite undertaking in this regard. However, the Borrower
shall sell its non-core assets, wherever applicable and an 'Asset Sale Committee'
would be set up with the approval of CDR EG for sale of such assets.
10.
The Company shall not declare any dividend on its equity shares without prior
consent of lenders/CDR EG.
11.
The Borrower shall not escrow its future cash flow (except discounting of bills in
the normal course of business) or create any charge or lien or interest thereon of
whatsoever nature except as provided in CDR package, without the approval of
CDR-EG.
12.
The Company shall not make any investments in other Companies or elsewhere
without prior approval of CDR EG.
13.
14.
15.
Any OTS or settlement the company may enter with non-CDR members will be
subject to prior approval of CDR EG. NPV of such settlements should be, as far
64
as possible, less than the NPV calculated on the basis of CDR package agreed by
lenders.
16.
The company shall keep the lenders informed of any legal proceedings, the
outcome of which would have a material impact on the debt servicing capability
of the company. In consultation with the lenders, it shall take such remedial
actions, as may be required in the best interest of the company and the lenders.
17.
Save as aforesaid all other terms and conditions of the earlier loan agreements
entered into between the company and the institutions shall apply mutatismutandis, to the extent not contrary to the terms of CDR package.
18.
The borrower cannot open/maintain any account or avail any type of banking
services/facilities from any bank (s) other than Banks/FIs from whom the
borrower is enjoying credit facilities. Any deviation in this regard needs to
approved by CDR Empowered Group.
19.
CDR Lenders, with the approval of CDR EG, shall establish Trust & Retention
Account (TRA) and enter into a Trust & Retention Account Agreement. The
Borrower would ensure submission of quarterly/annual cash flows to all CDR
lenders.
20.
CDR lenders shall appoint at the sole cost and expense of the Borrower a
Concurrent Auditor during the currency of the package, to review the operations
of the company on a periodic basis, monitoring the operations of TRA and any
other work that may be assigned by the lenders.
21.
CDR Lenders, with the approval of CDR EG, shall have the right to revoke the
CDR package in case the Borrower commits an event of default, as described in
the existing loan agreement or in the MRA or any Facility Agreement. The CDR
lender has to inform CDR EG within seven days of the event of default and
proposed course of action on the same. CDR EG would give a decision on the
65
same within 60 days, if not then individual lenders are permitted to take action at
their discretion.
22.
The CDR Lenders, with the approval of CDR-EG, shall have the right to
renegotiate the terms of restructuring including accelerating the repayment
schedule in the event of better performance by the Borrower vis--vis projections.
Under such circumstances the company shall clear dues as per accelerated
repayment schedule without demur.
23.
The CDR Lenders, with the approval of CDR EG, shall have the right to
recompense the reliefs/sacrifices/waivers extended by respective CDR Lenders
as per CDR guidelines.
24.
CDR Lenders, with the approval of CDR EG, shall have a right to reset the rate of
the term loan/s after every 3 years (or shorter period as decided by CDR EG) and
working capital interest rate every year.
25.
26. CDR Lenders shall have a right to convert entire/part of defaulted interest and
entire/part of defaulted principal into equity as per SEBI pricing formula in the
event of default. However, in the case of those CDR Lenders who already have
default conversion rights, the same would be governed by existing loan
covenants. The company/promoters shall take necessary steps and obtain all
requisite/necessary/statutory/other approvals for such allotment of equity
shares or a part of it in terms of their existing loan agreements.
27.
(a) CDR Lenders shall have a right to convert into equity upto 20% of the term
debt outstanding beyond seven years as per SEBI guidelines/loan covenants
whichever is applicable.
(b) As regards WCTL and FITL, the conversion option would be available at any
time during the restructuring period.
66
In the event the lenders or any of the lenders exercises its right to sell the
shares issued in terms of the conversion clause as (a) or (b) above, the first right
of refusal to buy back the shares would be offered to the promoters.
28.
B.
1.
2.
3.
67
C.
1.
2.
3.
D.
1.
CDR Lenders, with the approval of CDR EG, shall have a right to appoint
lenders' engineer/monitoring agency/Lenders Counsel.
2.
The Borrower/promoters would arrange for induction of a strategic investor/copromoter, if required by the approval CDR EG.
3.
CDR Lenders, with the approval of CDR EG, shall have a right to appoint an
independent Chairman/professional CEO.
68
Annexure V
Information to be furnished by the lead on implementation of restructuring scheme
as approved by the CDR Empowered Group
1. Name of the Company :
2. Date of sanction of scheme by CDR Empowered Group: ----------------3. Details of the proposal (to be limited to the institution/bank furnishing the
information)
Name of the institution /bank Date of approval of Details
of Comments
which referred the case/ the
scheme
by Package
participating lenders etc.
Empowered Group Approved
4. Progress in implementation:
Date of reference
to the delegated
authority seeking
approval
Date of
approval by
the delegated
authority
Date of
effectiveness of the
package in the
books of institution
/bank
Date of
Communicat
ion to the
Assisted Unit
Reasons for
delay in
effecting the
package, if
any.
5. Monitoring Committee
S.No
Member FI/Bank
1.
2.
3.
4.
6. Payment Record of the Company
Bank
Represented By
in
performance
vis--vis
CDR
Annexure VI
List of circulars/clarifications issued/received post CDR Master Circular dated June 3,
2009
Added/replaced in
Revised Master
Circular at para no.
Particulars
01/2009-10
26-Mar-2010 Recompense
Replaced chapter 17
02/2010-11
Added as chapter 3
03/2010-11
Added to chapter 12
Added to chapter 12
8518/Policy/
5
2010-11
6
CMD's letter
1-Jul-2010
24-Mar-2011
71