Corporate Debt Restructuring
Corporate Debt Restructuring
Ashish Makhija B.Com (Hons.), LL.B., AICWA, MICA, FCA
17/05/2008 1
Meaning of Corporate Debt Restructuring (CDR)
• A method
• • • • used by companies with outstanding debt obligations to alter the terms of the debt agreements in order to achieve some advantage
Companies use debt restructuring to avoid default on existing debt or to take advantage of a lower interest rate.
17/05/2008 2
Methods of CDR
The existing debt is called and then replaced with new debt at a lower interest rate Companies can also restructure their debt by altering the terms and provisions of the existing debt issue
17/05/2008 3
Objectives of CDR
• To support continuing economic recovery • Enabling viable debtors to continue business operations • Promoting fair and equitable debt repayment to creditors
17/05/2008
4
Objectives of CDR
• Revival of viable Corporates (genuine cases) • Ensuring safety of money lent by Banks & FI’s
17/05/2008
5
RBI Guidelines on CDR
• Corporate Debt Restructuring System was evolved for the first time in 2001 • Working Group was setup in 2003 • Guidelines for CDR revised in February, 2003
17/05/2008 6
RBI Guidelines on CDR
• CDR system in the country has a three tier structure • CDR Standing Forum and its Core Group • CDR Empowered Group • CDR Cell
17/05/2008
7
RBI Guidelines on CDR
• CDR Standing Forum
• Representative general body of all financial institutions and banks participating in CDR system • To lay down policies and guidelines • To monitor the progress of corporate debt restructuring
17/05/2008
8
RBI Guidelines on CDR
• CDR Empowered Group
• To decide individual cases of corporate debt restructuring • Consisting of ED level representatives of IDBI, ICICI Bank Ltd. and SBI as standing members, in addition to ED level representatives of financial institutions and banks who have an exposure to the concerned company
17/05/2008 9
RBI Guidelines on CDR
•
Ashish Makhija B.Com (Hons.), LL.B., AICWA, MICA, FCA
17/05/2008 1
Meaning of Corporate Debt Restructuring (CDR)
• A method
• • • • used by companies with outstanding debt obligations to alter the terms of the debt agreements in order to achieve some advantage
Companies use debt restructuring to avoid default on existing debt or to take advantage of a lower interest rate.
17/05/2008 2
Methods of CDR
The existing debt is called and then replaced with new debt at a lower interest rate Companies can also restructure their debt by altering the terms and provisions of the existing debt issue
17/05/2008 3
Objectives of CDR
• To support continuing economic recovery • Enabling viable debtors to continue business operations • Promoting fair and equitable debt repayment to creditors
17/05/2008
4
Objectives of CDR
• Revival of viable Corporates (genuine cases) • Ensuring safety of money lent by Banks & FI’s
17/05/2008
5
RBI Guidelines on CDR
• Corporate Debt Restructuring System was evolved for the first time in 2001 • Working Group was setup in 2003 • Guidelines for CDR revised in February, 2003
17/05/2008 6
RBI Guidelines on CDR
• CDR system in the country has a three tier structure • CDR Standing Forum and its Core Group • CDR Empowered Group • CDR Cell
17/05/2008
7
RBI Guidelines on CDR
• CDR Standing Forum
• Representative general body of all financial institutions and banks participating in CDR system • To lay down policies and guidelines • To monitor the progress of corporate debt restructuring
17/05/2008
8
RBI Guidelines on CDR
• CDR Empowered Group
• To decide individual cases of corporate debt restructuring • Consisting of ED level representatives of IDBI, ICICI Bank Ltd. and SBI as standing members, in addition to ED level representatives of financial institutions and banks who have an exposure to the concerned company
17/05/2008 9
RBI Guidelines on CDR
•