External Commercial Borrowing

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RAISING CROSS-BORDER DEBT – THE INDIAN AND US EXPERIENC

CAM authors collaborate for this article with our Guest Authors –  Michael J. Cochran, Partner at Kilpatrick Townsend & Stockton and Gabrielle Gollomp , Associate at Dentons

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India

Over the last decade, alternatives to traditional bank lending have emerged to service the debt requirements of Indian corporates. With Indian banks and non-bank companies facing stress (due to rising bad debt levels), Indian corporations are increasingly looking to tap into foreign debt sources. The development of offshore loan and debt markets can also be attributed to the operation of the Insolvency and Bankruptcy Code, 2016, which accords significant powers to creditors of debt-ridden Indian companies to restructure and resolve bad debts.
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Amendments to the ECB Policy - A Big Boost for Cross-Border Financings

Given prevailing market conditions, Indian corporates have increasingly been facing issues in accessing credit from onshore loan and debt capital markets. Recent Securities and Exchange Board of India (SEBI) regulations aimed at growing the debt capital market in India and reducing dependence of corporate India on loans from the Indian banking sector require that certain Indian companies must necessarily fund a specified percentage of their debt requirements by issuing bonds.

The forthcoming implementation of new norms on single and group exposures for the Indian banking system is also resulting in some of the larger corporates having to look at other options beyond their preferred relationship banks onshore for meeting their debt funding requirements. Both the non-banking sector and the mutual fund industry in India – significant sources for onshore debt markets – are also currently grappling with their own set of challenges. In this environment, these amendments to the External Commercial Borrowing (ECB) framework are most welcome as they will allow Indian companies to look at tapping the offshore loan and bond markets for raising debt capital.
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