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Debt recast rules of firms altered

Mumbai, Feb. 5: The Reserve Bank of India has revised the corporate debt restructuring guidelines, granting lenders an option to exit from the package by selling their stakes to either the existing or fresh lenders at an appropriate price to be decided mutually.

The proposals for the restructuring package should provide for option to a particular lender or lenders (outside the minimum 75 per cent who have agreed for restructuring) who for any internal reason, does/do not fully abide by the CDR empowered group’s decision on restructuring, RBI said. The new lenders shall rank on a par with the existing ones for repayment and servicing of the dues since they have taken over the existing dues, it said. In addition, the “exit option” would also be available to all other lenders within the minimum 75 per cent, provided the purchaser agrees to abide by the restructuring package cleared by the empowered group.

The exiting lenders may be allowed to continue with their existing level of exposure to the borrower provided they tie up with either the existing or fresh lenders for taking up their share of additional finance, it said. The CDR empowered group, while deciding the restructuring package, should also decide the issue regarding convertibility (into equity) option, it said.

Another significant feature of the revised guidelines is the provision of two categories of debt restructuring under the CDR system.

RBI said reference to CDR system could be triggered by any one or more of the creditors who have a minimum 20 per cent share in either working capital or term finance, or by concerned corporate, if supported by a bank or an FI having stake as in the first case.

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