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Flexible Structuring Scheme (5/25 Scheme)
1. Flexible Structuring Scheme for
Infrastructure Projects
(5/25 Scheme)
Sharon Jose
Manager (Stressed Asset Revival Unit)
Power Finance Corporation Limited
New Delhi
2. Features
Lenders may fix longer amortization period based on the economic
life of the project or tariff period
Periodic refinancing by same or different lender(s)
Available for fresh sanctions and for projects which have
achieved COD
Allowed as part of CAP under JLF guidelines
Suitable for projects facing cash flow mismatch during initial years,
but can service at least the interest on term loan after other expenses
3. Applicability
New Loans
• Applicable for fresh sanctions after 15th July, 2014
• Entire debt amortization to be scheduled within 80% of the initial economic
life/ tariff period
Standard Assets, post COD
• Shall not be treated as restructuring (subject to meeting specified criteria)
• Asset shall continue as Standard
Restructured Standard Assets, post COD
• Shall not be treated as repeated restructuring (subject to meeting specified
criteria)
• Asset shall continue as Restructured Standard
NPAs
• Shall be treated as restructuring and the asset would continue as NPA
• Upgradation after satisfactory performance during ‘Specified Period’
• Periodic refinancing permitted after account becomes Standard
4. Criteria for Preserving Asset Classification
•Structuring to be carried out only after COD is achieved
•In case of Deemed DCCO, for debt corresponding to commissioned Units
•Structuring allowed only once during the project’s lifetime
Timing
•Entire debt amortization to be scheduled within 85% of the initial economic life/
Tariff period
•NPV of the loan remains same before and after the change in the amortization
schedule
Amortization
•The viability of the project needs to be reassessed by lender and vetted by the
Independent Evaluation Committee (IEC)
Viability
•Aggregate exposure of all institutional lenders should exceed Rs.250 crore
Exposure
5. Other Provisions
•Further refinancing shall stop
•The lender who holds the loan when it becomes NPA shall recognize the loan as
NPA and make necessary provisions
•Once the account comes out of NPA, it will be eligible for refinancing
If the Debt Facility becomes NPA at any stage
•Lenders may determine the pricing of the loans at each stage of sanction of the
Initial Debt Facility or Refinancing Debt Facility
•Pricing should not be below the Base Rate of the bank
Pricing
•Repayments at the end of each refinancing period could be structured as a bullet
repayment, with the intent specified upfront that it will be refinanced.
•The refinance may be taken up by the same lender or a set of new lenders, or
combination of both, or by issue of corporate bond
Refinancing
6. Independent Evaluation Committee (IEC)
• President, Institute of Companies Secretaries of India
• President, Institute of Cost Accountants of India
• President, Institution of Valuers
• President, Institution of Engineers (India)
Members
• Frequency of once a month or shorter
• Heads of the Institutions can depute other senior functionaries for
meetings
• Quorum of 3 out of 4 members
• Decision based on consensus, and if not possible, on simple
majority of members present
• Remuneration of each member is Rs. 25,000 per meeting, per
reference + stay & out of pocket expenses on actuals
Meetings
7. When to Consider Flexible Structuring
Project
Commissioned?
No
Yes
Explore other options
like SDR/ OSDR/ CIRP
Aggregate
exposure >
Rs.250 crore?
Yes
No
Cash flows
support interest
servicing?
Yes
Consider Flexible
Structuring
Explore other options
like S4A/ CIRP
No
Explore other options
like SDR/ OSDR/ CIRP
8. Illustration of NPV Calculation by Banks
Assumptions Before 5:25 After 5:25
Loan Amount (Rs. Crore) 5000 5000
Quarterly repayment instalments 32 (8 years) 72 (18 years)
D:E Ratio 70:30 70:30
Rate of Interest of TL 13.5% 11.9%
ROE of Borrower 15% 15%
Discounting Rate (Base Rate) 10% 10%
NPV for Lender (Rs. Crore) 617 617
Source: CARE Ratings