A PRESENTATION
BY
ASHOK GUPTA, SVP, IDBI CAPITAL

 CDR is a voluntary non-statutory mechanism based on
DCA and ICA having a principle of approvals by supermajority.
 It covers only multiple accounts/ syndication/ consortium of accounts with outstanding exposure of
Rs.10 crore and above by Banks/ Institutions.
 BIFR/ DRT and other suit-filed cases are eligible for restructuring under CDR.

CDR System - Structure & Legal Basis
A three-tier structure:
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CDR Standing Forum
CDR Empowered Group
CDR Cell
Legal basis/ Discipline in the CDR System is provided by the Debtor-Creditor Agreement (DCA) and the
Inter-Creditor Agreement (ICA).

Presently, there are 51 CDR Members under the CDR Forum comprising of the following :
 Public Sector Banks – 26
 Private Sector Banks – 14
 Financial Institutions/ Public Sector Insurance
Companies - 11

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Representative body of all CDR member FIs,
Banks
Self empowered body
Comprises Chairman/ CMDs of IDBI Bank,
State Bank of India (SBI), ICICI Bank, Punjab
National Bank (PNB), Bank of India (BOI),
Bank of Baroda (BOB), Chairman of Indian
Banks Association (IBA), and CMDs of all other member FIs/ Banks
Lays down policies and guidelines
Monitors progress of CDR

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Small group carved out of Standing Forum
Comprises Chairman/ CMDs of IDBI, SBI,
ICICI Bank, PNB, BOI, BOB and Chairman,
IBA
Assists Standing Forum in formulating policies
Addresses operational difficulties of CDR
Empowered Group
Lays down guidelines within the broad framework of RBI Guidelines

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ED level representatives of IDBI, SBI, ICICI Bank as standing members
Senior Executives of FIs, banks with exposure in concerned company
Voting in proportion to exposure/ no.
Approval by super-majority (75% by value & 60% by number)
Executives attending EG meetings should have general authority from their Boards to take decisions

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Two-stage process to facilitate decision making
Flash Report for exchange of views and inprinciple clearance
Viability / rehabilitation potential to be established
Final Report within 60/ 90 days
Opportunity to all lenders to express views
Detailed discussion before approval

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Assisting CDR Standing Forum/ Core Group/
Empowered Group
Making initial scrutiny of proposals
Placing proposals for consideration of EG
Housed in IDBI
Staff deputed from Core Group member banks/
FIs
May take outside professional help
Contribution
 CG Member banks - Rs.50 lakh each
 Other CDR members - Rs. 5 lakh each

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Consortium (Min. 2 lenders)
Aggregate debt outstanding Rs 10 crore and above
(incl. NFB)
Cases of fraud and misfeasance ineligible. Wilful
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CG
Standard & Sub-standard accounts under CDR
Category-I
Doubtful accounts under CDR Category-II

CDR - Salient Features
Eligibility Criteria (Contd.)
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DRT and large value BIFR cases (>Rs. 15 crore) also eligible
Clearance of Core Group mandatory for BIFR/
Wilful Default cases
Criteria laid down by Core Group for BIFR cases
BIFR approval of DRS necessary before implementation

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By any one or more of the creditors having minimum 20% share in either Working Capital or Term
Loan or both
By concerned corporate if supported by a Bank or FI having stake as above

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Final approval by EG within 60 days except for large, complex cases where 90 days allowed
Extension up to 180 days (maximum) for exceptional cases by Core Group
Decision by super-majority
Super-majority decision binding on dissenting CDR members

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Initial scrutiny before submitting Flash – maximum 30 days
Approval of Flash - zero date
Approval of Final Package - maximum 60/
90 days from Flash approval date
Issue of LOA - within 15 days of approval of
Final Package
Implementation of package by all – within
120 days from LOA

 Viability Parameters- Benchmarks
- DSCR - 1.25:1 (Avg. Adj. DSCR in first 5 years)
- Return on Capital Employed
G sec + 2%
- Gap between IRR and cost of capital – at least 1%
- Break-even analysis – in line with industry
- Industry indicators – comparison with
EBIDTA, price realization, etc
- Loan life ratio- 1.4:1

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 Effective implementation is the key to success of the package
Adherence to timelines
Compliances
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By promoters & lenders
Operational hurdles
New developments/ environmental challenges
Capex / debt servicing issues
Review of performance vis-à-vis projections

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Monitoring Institution
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Usually Referring lender or the Lead lender
Monitoring Committee
 Three or more lenders (TL, WC, minority). CDR Cell and Borrower as invitee.
Concurrent Auditor / LE / SA
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Independent expert agency
Terms of reference on case to case basis
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Performance & variance analysis
Concurrent audit / TRA structure and monitoring

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Working out restructuring package in large, complicated cases from Flash stage
Monitoring sanction, implementation as per timelines
Ensuring compliance by promoters, company of various stipulations
Ensuring security creation and sharing of security between term lenders and working capital banks

2
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4
(as on March 31, 2014)
Sr. No. Proposals No. of cases
1 Referred 622
Total Debt
(Rs. Crore)
429989
Approved
Closed/
Rejected
Under
Process
476
111
35
330444
57540
42005

 Approval to package by Super Majority is binding on all CDR lenders.
 Availability of cash flows on account of deferment of principal repayment/ funding of interest, which helps the Company in focusing on its operations and come out of the stress.
Irregular portion in CC/ devolved LCs may also get converted into WCTL to be repaid over a period.

(contd.)
 Reduction in interest rate in WC & TL helps improve the profit margin for the Company.
However, interest re-set (after 3 years for TL & 1 year for WC) would be there.
 Conversion of a part of unsustainable debt into equity/ equity related instruments to improve the debt servicing/ interest servicing capability of the
Company, if acceptable to lenders.

 Retention/ Restoration of ‘Standard’ Asset
Company by way of more positive approach from the lenders including grant of any additional funds
(Working Capital and/or Term Loan), if necessary.
 Monitoring Institution (MI) & Monitoring
Committee (MC) play an important role and
MC members instead of a large no. of lenders
(ranging from 10 to 30 in many cases).

Advantages to the Company (contd.)
 After admission of the case itself under CDR
System, ‘Standstill Clause’ & ‘Holding on
Operations’ are available to the Company which helps them arrest any further deterioration.
 There is time-bound approach under CDR.
Package gets approved within 60/90 days and implementation within 120 days of the approval.

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Lenders can retain/ restore ‘Standard Asset’ classification, if not repeated restructuring.
Atleast 25% of lenders’ sacrifices has to be brought by the
Promoter.
Additional security of pledge of Promoters’ shares &
Personal Guarantee of Promoters.
Lenders can convert part of debt into equity whereby provision requirement will reduce. Further, they can possibly enjoy the upside in equity in future.

Advantages to the Lenders (Contd.)
 Provisioning on account of sacrifice is usually lesser than it would have been required to make upon account being downgraded to
Substandard/ Doubtful.
 Further, provision requirement in CDR case gets reduced each year whereas it increases each year in case of NPA accounts.

Advantages to the Lenders (Contd.)
 Lenders may agree for the package only if viability is established. For this purpose, they can get TEV Study carried out to satisfy themselves regarding the viability.
 Lenders can stipulate to bring back investments in subsidiary companies, if any. Sale of idle or non-core assets/ unprofitable units can be part of the package to reduce the debt.

Advantages to the Lenders (Contd.)
 There is better monitoring in CDR cases by way of MI & MC being there. Further, usually
Concurrent Auditor/ Lenders’ Engineer is appointed to have a control on Company’s operations/ accounts.
 TRA is stipulated to capture entire cash flows and also ensure better financial discipline in the Company.