Reserve Bank of India accepting applications to refinance convertibles

By Angela McDaniels

Tacoma, Wash., July 5 - Reserve Bank of India announced guidance for Indian companies wishing to refinance their foreign-currency convertible bonds.

The bank decided to consider applications for refinancing in view of concerns that Indian companies that may be facing difficulty in meeting their redemption obligations, according to a bank news release.

Restructurings that involve changing the existing conversion price will not be allowed.

Companies wanting to refinance may issue new foreign-currency convertibles or external commercial borrowings subject to the following terms and conditions:

• The new issue size must not exceed the outstanding redemption value at maturity of the outstanding convertibles;

• The new issue must not be sold six months prior to the maturity date of the outstanding convertibles;

• The redemption of the outstanding convertibles must be clearly stated as the purpose of the new issue;

• The new issue size must be $500 million or less in order to be considered via the automatic route of application. Issues greater than that will be considered via a different approval route; and

• The new issue must have the stipulated average maturity period and applicable all-in-cost required by existing guidelines.

The end use of the proceeds will be subject to monitoring.

The new guidelines took effect on Monday.

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