“emerging opportunities in corporate finance“ various provisions of cdr scheme amar mainkar
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“Emerging Opportunities in Corporate Finance“ Various provisions of CDR Scheme Amar Mainkar AGM, CDR Cell December 1, 2012. OBJECTIVES To ensure timely & transparent mechanism for restructuring debts of viable corporate entities facing problems, for the benefit of all concerned. - PowerPoint PPT PresentationTRANSCRIPT
“Emerging Opportunities in Corporate Finance“
Various provisions of CDR Scheme
Amar MainkarAGM, CDR Cell
December 1, 2012
OBJECTIVES
To ensure timely & transparent mechanism for restructuring debts of viable corporate entities facing problems, for the benefit of all concerned.
To aim at preserving viable corporates that are affected by certain internal and external factors
To minimize the losses to creditors and other stakeholders through an orderly and coordinated restructuring programme.
Legal Basis
CDR is a voluntary system based on Debtor Creditor Agreement (DCA) and Inter Creditor Agreement (ICA). DCA & ICA provide the legal basis to the CDR Mechanism
CDR Set Up
Standing Forum
Core Group
Empowered Group
CDR Cell
Standing Forum•Representative body of all CDR member FIs, Banks •Self empowered body•Comprises Chairman/ CMDs of all member institutions •Lays down policies and guidelines• Monitors progress of CDR
Core Group• Small group carved out of Standing Forum• Comprises Chairmen/ CMDs of IDBI, SBI, ICICI
Bank, PNB, BOI, BOB, Chairman, IBA & Dy Chairman, IBA (Representing Foreign Banks)
• Assists Standing Forum in formulating policies• Addresses operational difficulties of CDR
Empowered Group• Lays down guidelines for workouts
CDR Empowered Group
•ED level representatives of IDBI, SBI, ICICI Bank as standing members•Senior Executives of FIs, banks with exposure in concerned company•Executives attending EG meetings should have general authority from their Boards to take decisions
CDR Cell
•Formats for Flash/Final Report, all CDR and RBI Circulars, Statistical Data etc.•Assisting CDR Standing Forum/ Core Group/ Empowered Group•Making initial scrutiny of proposals. Especially viability of the case and adherence of RBI guidelines.• Placing proposals for consideration of EG
Admission Criterion
Loan assets with an aggregate debt outstanding ( inclusive of non fund limits) of Rs 10 crore and above and involving at least two lenders.
The case may be referred by a lender with exposure of minimum 20% by value. A corporate can also refer its case with letter of support from a lender or lenders with exposure of 20% by value.
Reference of any account / case to CDR Cell is asset classification neutral. Asset of any class can be admitted subject to certain specific stipulations.
Other stipulations regarding minimum margin from the Promoters, Personal Guarantee of Promoters, Pledge of promoters holding etc have to be observed.
Admission Criterion (contd)
Cases of fraud and misfeasance are ineligible.
Cases of willful default may be considered if permitted by Core Group depending on case specifics.
BIFR cases are eligible subject to approval of Core Group and with certain additional conditions.
Decision process
Decisions in the CDR system are taken on basis of super majority where 75% of lenders by value and 60% of lenders by number have to agree.
Stand-still PeriodLenders & borrowers not to initiate or proceed with civil suitNot to approach any authority for any relief Directors not to resign.Documents stand extended.Handholding operations to be extendedStatus quo ante for asset classification if package approved & implemented within 120 Days.
Outline of the Process• Submission of Flash Report – scrutiny to ensure benchmarks and admission of the case by Empowered Group.• Appointment of Monitoring Institution (MI) & members of Monitoring Committee (MC)• Conduct of Joint Lenders Meet (JLM) for finalization of Restructuring Package• Approval of Final Restructuring Package by EG.• Execution of Master Restructuring Agreement & Trust & Retention Agreement.
Components of Restructured packages
Within overall regulatory guidelines applicable, each package is tailor made to suit the corporate needs. Generally the package may involve certain concessions in rate of interest, carving out irregular portion by giving Working Capital Term Loan ( WCTL) , granting of Funded Interest Term Loan (FITL), conversion of debt to equity or other debt instruments.
Additional Finance• Additional Finance, if any, to be provided by CDR lenders or all lenders on pro rata basis.• Preferential claim with respect to cash flows in respect of additional exposures.•Waterfall Mechanism is embedded in the MRA and TRA•Asset classification benefits for additional exposures as per extant regulatory guidelines. •Sharing additional finance compulsory only in Category I cases.
TimelineInitial scrutiny for Flash Report max 30 days
Approval of Flash : Next EG Meeting.
Approval of Final Package 60/ 90 days
Issue of LOA: After confirmation of minutes
Approval by individual lenders : 45 days Package Implementation by all : 120 days
Key Financial Benchmarks
DSCR - 1.25:1
Return on Capital Employed – 5 year G sec + 2%
Gap between IRR and cost of capital – at least 1%
Loan Life Ratio – 1.40
Break-even analysis – in line with industry
Industry indicators – EBIDTA, price realization,etc
Monitoring & Follow up
CDR Cell ensures regular conduct of meetings of MC and follows up on compliance of various aspects of Restructuring Package approved and also the operational and financial performance of the corporate vis-à-vis the projections. MC is a recommendatory body and decisions are made by CDR EG.
Exit from CDR
Exit from CDR is possible either due to non compliance / non adherence to the package, external/ industry level factors affecting the package implementation, improved performance of the corporate, merger with larger entity or for any other reason like OTSUpon Exit, Recompense clause would be triggered in certain cases. The sacrifices made by the CDR lenders would have to be recompensed by the corporate.
Recent Developments………….Mahapatra Committee Recommendations – July 2012• No IRAC protection after 2 years• Increased provisioning on standard assets•Reduction in timelines for viability•Definition of specified period•Change in promoter contribution•Debt to equity swaps•Personal guarantee mandatory
Major industry-wise classification of CDR approved cases
Industry No of cases
Aggregate Debt
( Rs in Crores)
% share
Iron & Steel 34 39714 23.57
Textiles 60 12090 7.18
Fertilizers 8 8454 5.02
Construction 2 8762 5.20
Sugar 26 6733 4.00
Telecom 10 9886 5.87
Infrastructure 14 17490 10.38
NBFC 7 7247 4.30
Cement 11 6595 3.91
Achievements till date
Sr. No.
Proposals No.of cases
Total Debt
(Rs. Crore)
1 Referred 433 227021
2 Approved 309 168472
3 Rejected 63 21377
4 Under Process 61 37172
Current Status of Package Implementation
Sr.no Status of implementation
No. of cases Debt involved
(Rs. crore)
1 Fully implemented
154 94813
2 Under Implementation
28 21180
Total Cases 182 115993
Packages by size of debt ( Rs in Crores)
Sr. No. Size of debt No. of Cases Debt involved
Avg. Size
1 Up to 50 45 1481 33
2 51 to 100 53 4225 80
3 101 to 500 144 33321 231
4 501 to 1000 28 20377 728
5 1001 to 1500 17 19642 1155
6 Above 1500 22 89426 4065
Total 309 168472 545
Further information……
CDR Cell maintains a web site, www.cdrindia.org which can be visited for circulars, downloads and regular updates.
Speakers Contact Details
Amar MainkarAsst General Manager
Corporate Debt Restructuring19th floor, IDBI TowerWorld Trade Complex
Cuffe Parade, Mumbai 400 005
Phone : 32941088, 66552477E Mail : [email protected]
Thank you