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    (General Awareness)

    STRATEGIC DEBT RESTRUCTURING Strategic Debt Restructuring (SDR) has been introduced by the Reserve Bank of India. SDR Scheme shall help banks recover their loans by taking control of the distressed listed companies.

    The Scheme has been started with a view to revive stressed companies by providing lending institutions a

    way to start change of management in companies which fail to achieve the goals under Corporate Debt

    Restructuring (CDR).

    ELIGIBILITY CRITERIA Outstanding debts would be done by a consortium of lending institutions known as the

    Joint Lenders Forum (JLF).

    NBFC's and other financial institutions shall be included under JLF.

    CONDITIONS OF SDR At the time of initial restructuring, the JLF must put in an option in the loan agreement to convert the

    entire or part of the loan including the unpaid interest into equity shares if the company fails to achieve the

    goals and critical conditions written in the restructuring package.

    Debt-equity swap will result in dilution of existing shareholders, therefore a special document shall be

    signed beforehand.

    It will result in the lenders acquiring a

    If the company fails to achieve the goals written in the restructuring package, the decision of starting the

    SDR must be taken by the JLF within 30 days.

    The JLF must approve the debt to equity conversion under the Scheme within 90 days of deciding to start

    the SDR.

    The JLF will get an additional 90 days to actually convert the loan into shares.

    DEBT TO EQUITY VALUE Conversion of outstanding debt into equity will be treated at a 'Fair Value' which will not exceed the

    lowest of

    Market Value, average of the day-end price of the previous 10 days

    Book Value per share in consideration of the company's balance sheet excluding the revaluation resources.

    In any case, the price cannot be lower than the face value of the share.

    BG ANALYSIS - The current global condition and economic downfall, where loans are defaulted incorporates, the debt-

    equity swap concept is being considered by various organisations globally

    One of the crucial problems of the Scheme could be the price at which the debt to equity conversion must

    take place.

    The conversion price could be higher than the market price as the market value of these shares would have

    largely reduced, whereas the lenders as per the Scheme will be required to convert the debt into equity at a

    price which shall not exceed the fair value (market value).

    This may result in further losses to the lenders.

    This scheme would only succeed if the comapanies under SDR are High Creditworthy

    Date of Release -13-Jan-16 SUBJECT: GA



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