Category Archives: TERM LOANS DEBENTURES BONDS AND SECURITISATION

Control Related Covenants

Control Related Covenants Aim at ensuring competent management for the borrowers. This covenants may include. • Boroadbasing of board of directors and finalization of management set-up in consultant with the financial institution, . • Effective organisational changes and appointment of suitable professional staff, and • Appointment of nominee directors to represent the financial institutions and safeguard i

Cash flow Related Covenants

Cash flow Related Covenants Which are intended to restrain cash outflows of the borrowers include: • Restriction on new projects/expansion without prior approval of the financial institution. • Limitation on dividend payment to a certain amount/rate and prior approval of the financial institutions for declaration of higher amount/rate. • Arrangement to bring additional funds as unsecured loans/deposits to

Asset Related Covenants

Asset Related Covenants Are intended to ensure the maintenance of a minimum asset base by the borrowers. Included in this set of covenants are: • Maintenance of working capital position in terms of a minimum current ratio. • Restriction on creation of further charge on asset. • Ran on sale of fixed assets without the lenders concurrence/approval. Liability Related Covenants May, inter alia, include: • Rest

Covenants

Covenants Negative To protect their interest. the financial institutions reinforce the asset security stipulation with a number of restrictive terms and conditions. These are known as covenants. They are positive/affirmative and negative in the sense of what the borrower should and should not the conduct of its operations and fall broadly into four sets as respectively related to as liabilities, cash flows and co

Security

Security All term loons are secured. While the assets financed by term loans serve as primary security all the other present and future assets of the company provide collateral/secondary security for the term loan. Generally, all the present as well as the future immovable properties of the borrower constitute a general mortgage/ first equitable mortgage/floating charges for the entire institutional loan includ

Features of Term Loans

Features of Term Loans Maturity  The maturity period of term loans is typically longer in case of sanctions by financial institutions in the range of 6:10 years in comparison to 3-5 years of bank advances. However, they are rescheduled to enable corporate/borrowers tide over temporary financial exigencies. Negotiated  The term loans are negotiated loans between the borrowers and the lenders. They are akin to pr

TERM LOANS

TERM LOANS Term loans are also known as term/project finance. The primary source of such loans are financial institutions. Commercial banks also provide term finance in a limited way. The financial institutions provide project finance for new projects as also for expansion/diversification and moderation whereas the bulk of term loans extended by banks, is in the form of working capital term loan to finance the

TERM LOANS DEBENTURES BONDS AND SECURITISATION

TERM LOANS DEBENTURES/BONDS AND SECURITISATION INTRODUCTION Apart from owners share capital, corporate enterprises raise long-term funds from creditors in the form of term loans, debentures, bonds and so on. The bulk of term loans raised by the corporate was provided by the financial institutions such as IDBI, ICICI and IFCI. Their support has declined substantially in recent years. Banks have entered term-lendi