“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 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 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 IndustryNo of cases Aggregate Debt ( Rs in Crores) % share Iron & Steel Textiles Fertilizers Construction Sugar Telecom Infrastructure NBFC Cement

Achievements till date Sr. No. ProposalsNo.of cases Total Debt (Rs. Crore) 1Referred Approved Rejected Under Process

Current Status of Package Implementation Sr.noStatus of implementation No. of casesDebt involved (Rs. crore) 1Fully implemented Under Implementation Total Cases

Packages by size of debt ( Rs in Crores) Sr. No.Size of debtNo. of CasesDebt involved Avg. Size 1Up to to to to to Above Total

Further information…… CDR Cell maintains a web site, 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 Phone : , E Mail :

Thank you