“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.
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 Period
Lenders & borrowers not to initiate or proceed
with civil suit
Not to approach any authority for any relief
Directors not to resign.
Documents stand extended.
Handholding operations to be extended
Status 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.
Timeline
Initial 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-àvis 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 OTS
Upon 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
1
Fully
implemented
2
Under
Implementation
Total Cases
No. of cases
Debt involved
(Rs. crore)
154
94813
28
21180
182
115993
Packages by size of debt
Sr. No. Size of debt
No. of Cases
Debt
involved
( Rs in Crores)
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 Mainkar
Asst General Manager
Corporate Debt Restructuring
19th floor, IDBI Tower
World Trade Complex
Cuffe Parade, Mumbai 400 005
Phone : 32941088, 66552477
E Mail : cdr.amarmainkar@idbi.co.in
Thank you