Cdr of a company

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CA Shruti Bhavsar (Querist)
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29 October 2013 Dear All,

If a company goes in to CDR (Corporate Debt Structuring), what impact will come on the Finance cost of the Company, how the company has to pay the old dues towards Finance cost.??
or old dues of finance cost are waived off by the banks??

please guide me for the same

Regards,
Shruti

Nikhil Kaushik

Nikhil Kaushik (Expert)
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29 October 2013 1. In CDR, certain costs are deferred to a later date. There is no concept of waiver in the CDR. ANy waiver upfront needs to be recompensed to the banks when the company exit CDR.

2. There is an interim relief on the finance cost on the existing loans as the banks reduce the interest rate. However, whatever reduction is there has to be paid back through recompense mechanism.

3. Whether the cost of new debt, if arranged from outside the CDR mechanism, will be higher or not shall be a variable factor depending upon the facts of each case. Often companies successfully exiting CDR have got very good interest rates later on.

4. The dues towards old finance cost are covered through a Funded Interest Term Loan or Working Capital Term loan mechanism. In FITL, the interest overdues are converted into a term loan to be repaid over a period of time.

CA Shruti Bhavsar

CA Shruti Bhavsar (Querist)
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29 October 2013 thank you. you have given very useful information to me.

Shruti

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Nikhil Kaushik

Nikhil Kaushik (Expert)
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29 October 2013 You are welcome Shruti.