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NPA crisis: Sebi plans to relax norms for purchase of distressed assets

The markets regulator will bring an easy pricing formula for open offer to public shareholders

BS Reporter  |  Mumbai 

Tackling bad laons: How Sebi has done its bit

Capital market regulator Securities and Exchange Board of India (Sebi) is again extending a helping hand to the government and the (RBI) in their fight against

According to reports, is planning to ease the acquisition rules to allow investors to buy distressed assets from banks.

is set to come up with an easy pricing formula for an to public shareholders and lock-in requirements for acquirers of distressed companies, according to an Economic Times report. At present, such relaxations are given only to banks.


This is not the first time that has pitched in to help tackle the problem of Rs 6-lakh-crore stressed assets that banks are saddled with. It recently made several relaxations to the securities regulations to allow a more efficient corporate debt restructuring.

Here is a look at some of the recent rule relaxations:

Easier preferential allotments norms

In April, gave banks a leeway from its six-month lock-in requirement on acquired through preferential allotment. It also removed the condition that rendered a lender ineligible if it had bought of a company in the past six months.

Often, the debt restructuring exercise involves converting debt into equity or issue of fresh equity to lenders. This is done through preferential issues. As a result, the lock-in requirement and eligibility norms delayed the process earlier. 

“Many banks have to frequently sell of stressed companies. This makes them ineligible for future allotment of for a period of six months. The relaxations planned are designed to help banks in speedy recovery from a listed borrower,” a regulatory official said.

Crackdown on wilful defaulters 

In 2016, barred those named wilful defaulters from raising public funds through stocks and bonds, and also from taking board positions at listed companies. 

In a notification, said, “An issuer cannot make any public issues, debt or non-convertible redeemable preference if the company or its promoters or directors figure on the list of wilful defaulters".

The regulator said that no wilful defaulter shall make a public announcement of an for acquiring It also barred them from entering into any transaction that would attract the obligation to make a public announcement of an The move saw several individuals, including Vijay Mallya, tagged wilful defaulters by banks getting disqualified from holding board positions.

relaxation

The relaxations mentioned earlier were first given to banks in 2015. However, said that the pricing formula will not be applicable “in cases of conversion of debt into equity of listed borrower companies in distress by the lending institutions." 

The regulator said that the pricing will now be as per “a fair price formula" and the price will not be less than the face value.

As per guidelines, the price has to be higher than the average weekly high and low of the closing price during six months preceding the allotment. 

The price also needs to be higher than the average of weekly high or low of the closing prices during the preceding two weeks.

The price derived from this formula has often thwarted lenders' efforts to recast debt of defaulting borrowers. For instance, in 2011, lenders to had to convert debt amounting to Rs 1,400 crore into equity at a 60 per cent premium to the prevailing market rate back then. 

The conversion price as per formula worked out to Rs 64.5 even as of were trading at Rs 40 per share in the secondary market during the time of conversion.

At the time, said it would provide further relaxations if debt-to-equity conversions are undertaken as part of the proposed Strategic Debt Restructuring (SDR) scheme of RBI. 

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NPA crisis: Sebi plans to relax norms for purchase of distressed assets

The markets regulator will bring an easy pricing formula for open offer to public shareholders

The markets regulator will bring an easy pricing formula for open offer to public shareholders
Capital market regulator Securities and Exchange Board of India (Sebi) is again extending a helping hand to the government and the (RBI) in their fight against

According to reports, is planning to ease the acquisition rules to allow investors to buy distressed assets from banks.

is set to come up with an easy pricing formula for an to public shareholders and lock-in requirements for acquirers of distressed companies, according to an Economic Times report. At present, such relaxations are given only to banks.

This is not the first time that has pitched in to help tackle the problem of Rs 6-lakh-crore stressed assets that banks are saddled with. It recently made several relaxations to the securities regulations to allow a more efficient corporate debt restructuring.

Here is a look at some of the recent rule relaxations:

Easier preferential allotments norms

In April, gave banks a leeway from its six-month lock-in requirement on acquired through preferential allotment. It also removed the condition that rendered a lender ineligible if it had bought of a company in the past six months.

Often, the debt restructuring exercise involves converting debt into equity or issue of fresh equity to lenders. This is done through preferential issues. As a result, the lock-in requirement and eligibility norms delayed the process earlier. 

“Many banks have to frequently sell of stressed companies. This makes them ineligible for future allotment of for a period of six months. The relaxations planned are designed to help banks in speedy recovery from a listed borrower,” a regulatory official said.

Crackdown on wilful defaulters 

In 2016, barred those named wilful defaulters from raising public funds through stocks and bonds, and also from taking board positions at listed companies. 

In a notification, said, “An issuer cannot make any public issues, debt or non-convertible redeemable preference if the company or its promoters or directors figure on the list of wilful defaulters".

The regulator said that no wilful defaulter shall make a public announcement of an for acquiring It also barred them from entering into any transaction that would attract the obligation to make a public announcement of an The move saw several individuals, including Vijay Mallya, tagged wilful defaulters by banks getting disqualified from holding board positions.

relaxation

The relaxations mentioned earlier were first given to banks in 2015. However, said that the pricing formula will not be applicable “in cases of conversion of debt into equity of listed borrower companies in distress by the lending institutions." 

The regulator said that the pricing will now be as per “a fair price formula" and the price will not be less than the face value.

As per guidelines, the price has to be higher than the average weekly high and low of the closing price during six months preceding the allotment. 

The price also needs to be higher than the average of weekly high or low of the closing prices during the preceding two weeks.

The price derived from this formula has often thwarted lenders' efforts to recast debt of defaulting borrowers. For instance, in 2011, lenders to had to convert debt amounting to Rs 1,400 crore into equity at a 60 per cent premium to the prevailing market rate back then. 

The conversion price as per formula worked out to Rs 64.5 even as of were trading at Rs 40 per share in the secondary market during the time of conversion.

At the time, said it would provide further relaxations if debt-to-equity conversions are undertaken as part of the proposed Strategic Debt Restructuring (SDR) scheme of RBI. 
image
Business Standard
177 22

NPA crisis: Sebi plans to relax norms for purchase of distressed assets

The markets regulator will bring an easy pricing formula for open offer to public shareholders

Capital market regulator Securities and Exchange Board of India (Sebi) is again extending a helping hand to the government and the (RBI) in their fight against

According to reports, is planning to ease the acquisition rules to allow investors to buy distressed assets from banks.

is set to come up with an easy pricing formula for an to public shareholders and lock-in requirements for acquirers of distressed companies, according to an Economic Times report. At present, such relaxations are given only to banks.

This is not the first time that has pitched in to help tackle the problem of Rs 6-lakh-crore stressed assets that banks are saddled with. It recently made several relaxations to the securities regulations to allow a more efficient corporate debt restructuring.

Here is a look at some of the recent rule relaxations:

Easier preferential allotments norms

In April, gave banks a leeway from its six-month lock-in requirement on acquired through preferential allotment. It also removed the condition that rendered a lender ineligible if it had bought of a company in the past six months.

Often, the debt restructuring exercise involves converting debt into equity or issue of fresh equity to lenders. This is done through preferential issues. As a result, the lock-in requirement and eligibility norms delayed the process earlier. 

“Many banks have to frequently sell of stressed companies. This makes them ineligible for future allotment of for a period of six months. The relaxations planned are designed to help banks in speedy recovery from a listed borrower,” a regulatory official said.

Crackdown on wilful defaulters 

In 2016, barred those named wilful defaulters from raising public funds through stocks and bonds, and also from taking board positions at listed companies. 

In a notification, said, “An issuer cannot make any public issues, debt or non-convertible redeemable preference if the company or its promoters or directors figure on the list of wilful defaulters".

The regulator said that no wilful defaulter shall make a public announcement of an for acquiring It also barred them from entering into any transaction that would attract the obligation to make a public announcement of an The move saw several individuals, including Vijay Mallya, tagged wilful defaulters by banks getting disqualified from holding board positions.

relaxation

The relaxations mentioned earlier were first given to banks in 2015. However, said that the pricing formula will not be applicable “in cases of conversion of debt into equity of listed borrower companies in distress by the lending institutions." 

The regulator said that the pricing will now be as per “a fair price formula" and the price will not be less than the face value.

As per guidelines, the price has to be higher than the average weekly high and low of the closing price during six months preceding the allotment. 

The price also needs to be higher than the average of weekly high or low of the closing prices during the preceding two weeks.

The price derived from this formula has often thwarted lenders' efforts to recast debt of defaulting borrowers. For instance, in 2011, lenders to had to convert debt amounting to Rs 1,400 crore into equity at a 60 per cent premium to the prevailing market rate back then. 

The conversion price as per formula worked out to Rs 64.5 even as of were trading at Rs 40 per share in the secondary market during the time of conversion.

At the time, said it would provide further relaxations if debt-to-equity conversions are undertaken as part of the proposed Strategic Debt Restructuring (SDR) scheme of RBI. 

image
Business Standard
177 22