Out-of-Court Debt Restructuring for a Stressed Infrastructure Company
Advised a stressed infrastructure borrower on an inter-creditor agreement-based restructuring under the RBI Prudential Framework — negotiating across seven lenders for sustainable debt terms without triggering IBC.
Practice Areas Involved
The Challenge
A Delhi NCR infrastructure company with total debt of approximately ₹780 crore across seven lenders had fallen into technical default following project cost overruns and a two-year delay in government approvals for a road project. The company's promoters were solvent and committed but required a 30-month extension to project completion milestones and a temporary moratorium on principal repayment. The largest lender (holding 38% of the debt) had already classified the account as NPA. The risk of a disorderly IBC filing by a creditor — which would trigger cross-default across all seven lenders and result in CIRP — was real and needed to be averted immediately.
Our Approach
We advised the company on engaging the lenders under the RBI Prudential Framework for Resolution of Stressed Assets (2019 Circular), which provides a structured inter-creditor agreement (ICA) mechanism for out-of-court resolution. Critically, the 2019 Circular requires 75% by value of lenders to approve a resolution plan — but also constrains the ability of minority lenders to independently trigger IBC during the ICA process, providing the moratorium protection the company needed.
We drafted the proposed restructuring term sheet and led the lender negotiations, which required addressing each lender's specific exposure and classification concerns separately before bringing them into a collective ICA framework. The restructuring involved a 30-month principal moratorium, interest restructured to partly paid/partly capitalised during the moratorium, a security sharing arrangement with revised priority, and a promoter equity infusion of ₹85 crore as a demonstration of commitment.
The largest lender's NPA classification was the most difficult negotiating point — we structured the deal to allow the account to qualify for the 'upgrade' provisions under RBI regulations on satisfactory restructuring, providing the commercial incentive for lender cooperation.
The Result
All seven lenders signed the ICA within four months. The restructuring plan was implemented on schedule. The account was upgraded from NPA classification within 12 months of ICA execution, consistent with the RBI upgrade provisions. The company delivered project completion within the extended milestone schedule. No IBC proceedings were filed. The total cost of the restructuring — including promoter equity infusion and professional fees — was approximately 15% of the estimated loss in liquidation, demonstrating the substantial value preserved by the out-of-court resolution.
Key Lessons
- ◆The ICA mechanism under the RBI 2019 Circular provides significant leverage to borrowers — the 75% approval threshold and IBC trigger constraints mean that cooperative restructuring is in every lender's rational interest.
- ◆Addressing each lender's individual classification and provisioning concerns before seeking collective sign-on to the ICA is essential — collective negotiation without bilateral pre-alignment consistently fails.
- ◆Promoter equity infusion as part of the restructuring package is the single most effective signal of commitment — it aligns promoter and lender interests and satisfies the 'skin in the game' test that lenders require.
- ◆NPA upgrade provisions under RBI regulations create a genuine commercial incentive for lender cooperation in out-of-court restructuring — always build this analysis into the lender negotiation strategy.
Facing a similar challenge?
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