13 July, 2015
On February 26, 2014, the RBI introducedthe "Framework for Revitalising Distressed Assets in the Economy – Guidelines on Joint Lenders' Forum (JLF) and Corrective Action Plan" (JLF Guidelines). The JLF Guidelines provided that restructuring packages under JLF and corporate debt restructuring should provide for timelines within which viability milestones should be achieved. The circular dated June 8, 2015provides an option to banks to undertake a strategic debt restructuring (SDR) by converting their loans dues into equity shares. The features of an SDR wouldinter alia include: (i) post conversion, all lenders under the JLFmust collectively hold 51% or more of the equity shares issued by the borrower; (ii) banks should include necessary covenants in the loan agreements including restructuring supported by necessary approvals to enable invoking of SDR; and (iii) conversion of debt into equity should be completed within 90 days from date of approval of the SDR package by JLF.
For further information, please contact:
Abhishek Saxena, Partner, Phoenix Legal
abhishek.saxena@phoenixlegal.in
