Corporate Debt Restructuring Final

7/31/2019 Corporate Debt Restructuring Final

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Mechanism where company endeavors to reorganize itsoutstanding obligations

Reorganization of the outstanding obligations can be made in

following ways:1) Increasing the tenure of the loan2) Reducing the rate of interest3) One time settlement4) Conversion of debt into equity5) Converting unserviced portion of interest into term loan


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When a corporate is having severe financial crisis interms of :

1) Trouble in repaying its debt obligation2) Inability in timely servicing of its interest


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Enhance the quantum of debt

Cease the current operations of the company and undergowinding up

To consider a structured plan to re negotiate the terms of itscurrent debt with existing lenders itself


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Unique opportunity to avoid being encumbered with NPAs

Recovering principle amount lent to corporate along with

returns on the investments and not liquidation of assets

Apart from this Liquidation proceedings are notorious foryielding low returns for creditors


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Whether a case should be referred for restructuring ornot is based upon thorough examination of facts &

viability of the case

However, wherever the demand for restructuring islegitimate, and there is a good reason to believe thatthe corporation may be revived, it must be considered

for restructuring.


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A hope of preservation of Viable corporate

Minimizing the losses

To support continuing economic recovery


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The CDR structure in India is based upon thethree tier structure as follows:

CDR CELL1) It is third tier of CDR mechanism

1) This cell makes the initial scrutiny of the proposals &

if restructuring gets approved this cell makes adetailed plan for restructuring in conjunction withthe lenders Empowered Group


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Empowered Group

1) ED level representatives of leading banks along withED level representatives of concerned lenders

2) This group based upon preliminary report prepared byCDR cell decides whether they should take up therestructuring or not, if yes then they provide initial

guidelines

3) When final restructuring plan is prepared by CDR cellthe same is again approved by EG


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Standing Forum

1) This is the top tier in CDR mechanism comprised of representatives of all the financial institutions & banks

2) This body lays down the policies & guidelines to befollowed by the EG & CDR cell for debt restructuring


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In the past, there have been several companies whichhave been referred to CDR, few of them are as follows:

1) Subhiksha Retail2) Vishal Retail3) GTL Infra4) Air India5) Wockhardt6) India cements7) Jindal Steel8) Essar Steel9) HPL


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Fully secured

Repeatedly restructured accounts

Viable

The repayment period.

Promoters sacrifice

Personal Guarantee


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Aviation is the backbone of the tourism industry

Aviation Reform

FDI

Public Private Partnership (PPP) mode.

Players in the Indian aviation


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Increase in ConsumerismIncreasing Tourists TravelIncreasing Business Travel

Entry of Low Cost CarriersRising Disposable incomesRising Middle Class PopulationIncreasing Competition


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Indian airports to have their infrastructure in placeHigh Aviation Turbine Fuel (ATF) prices

Congestion at airportsHigh airport chargesCut-throat Competition faced by Premium Airlines ontheir PricingShortage of qualified pilots and technical manpower

Safety and security issuesClosure of old airportsHigh taxation etc.


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Kingfisher Airlines is a private airline

Owned

Operations on May 9, 2005.

IFE systems

Merger

Financial Difficulties.


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Higher fuel price

Weak market analysis

Merger with Air Deccan


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Personal guarantee of 248.97 Crore

Collateral security of 5,238.59 Crore

Hypothecation of Kingfisher brand for 4,111Crore

Pledged securities of 101.58 Crore


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1. Conversion of loan into equity Reduction of interest burden

2. Conversion of loan intocumulativeredeemable preference shares

Reduces the interest burden, dividend is payable to shareholdersonly upon the generation of profits Company needs to pay dividend distribution tax

3. Moratorium period of two years Reduces the stress upon cash flowas there will be no repaymentliabilityfor 2 years


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4. Conversion of unpaid portionof interest into term loan

Reduces the penal interest liability

5. Reduction in Rate of interest Reduces the cash outflow interms of interest

6. Additional limits sanctioned Will help the company to manageits operational expenses till thetime it gets stabilized


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ICICI Bank sells entire Rs 4.3 bln debt exposure inKingfisher to SREI Infra

Indian banks' employees union AIBEA threatens protest if banks restructure Kingfisher Airlines debt


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Mallya has no money for IPL players

CDR cell look at Private equity and Merger andAcquisitions.

Lanco in talks for 23,000 crore loan recast.


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FDI

Round tripping of money

Low cost airline


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Corporate Debt Restructuring Final

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