Now on sale: 'Secured' FCCBs

Lenders insist on pledge of assets on both restructuring and new loans

After getting into messy legal battles with promoters and faced with the prospect of more defaults, foreign lenders are putting additional conditions on companies that are raising money issuing foreign currency convertible bonds (FCCBs). Lenders, usually foreign funds that specialise in FCCBs, are now demanding that assets, including shares owned by promoters, shares in subsidiaries and property, be pledged as collateral to secure these loans. This changes the character of the instrument itself, which were inherently unsecured. Such collateral is being insisted on for fresh loans, as well as ...