1. Nod for NBFCs to give takeout refinancing to infra projects

Nod for NBFCs to give takeout refinancing to infra projects

“The total repayment period should not exceed 85% of the initial economic life of the project/concession period in the case of PPP projects,” the RBI said

By: | Mumbai | Published: June 3, 2016 7:05 AM

The Reserve Bank of India (RBI) on Thursday allowed NBFCs to refinance any existing infrastructure and other project loans by way of take-out financing, without it being considered as restructuring.

However, such loans should be standard in the books of the existing lenders, and should have not been restructured in the past. “Such loans should be substantially taken over (more than 50% of the outstanding loan by value) from the existing financing lenders,” the central bank said, adding that the the repayment period should

be fixed by taking into account the life cycle of the project and cash flows from the project.

“For existing project loans where the aggregate exposure of all institutional lenders is minimum Rs 1,000 crore, NBFCs may refinance such loans by way of full or partial take-out financing and fix a longer repayment period, and the same would not be considered as restructuring in the books of the existing as well as taking over lenders,” RBI said.

It added that for the NBFC to avail of this facility, the project should have started commercial operation after achieving date of commencement of commercial operation (DCCO) and boards of the existing and new lenders should be satisfied with the viability of the project. “Further, the total repayment period should not exceed 85% of the initial economic life of the project / concession period in the case of PPP projects,” RBI explained.

In case of partial take-out, a significant amount of the loan (a minimum 25% of the outstanding loan by value) should be taken over by a new set of lenders from the existing financing lenders and the promoters should bring in additional equity, if required, so as to reduce the debt to make the current debt-equity ratio and debt service coverage ratio (DSCR) of the project loan acceptable to the NBFCs.

“A lender who has extended only working capital finance for a project may be treated as ‘new lender’ for taking over a part of the project term loan as required under the guidelines,” it said, adding that the facility will be available only once during the life of the existing project loans.

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