New Delhi, May 18 -- The Securities and Exchange Board of India (SEBI) has eased borrowing norms for infrastructure investment trusts (InvITs), including allowing them to borrow for refinancing debt.
The market regulator said an InvIT can borrow more than 49% of its asset value to refinance debt, if the debt was raised to meet specific purposes listed under Regulation 20(3)(b)(ii) of the InvIT Regulations.
Through a circular issued on May 15, the regulator also expanded the list of purposes for such borrowings .
Earlier, such borrowing was allowed only for the acquisition or development of infrastructure projects. Now, it is permitted even to refinance debt, to meet major maintenance expenses in road projects and undertake capital expenditure to enhance asset performance or expand project capacity.
However, refinancing debt is allowed only to repay the principal amount. "Any accumulated interest or any charges or fees by whatever name called shall not be refinanced," the circular said.
SPVs after contract ends
Through a separate circular issued the same day, SEBI also clarified which special purpose vehicles (SPVs) of InvITs can continue to be active after the termination of the concession agreement.
Concession agreements are the contracts drawn out between the InvIT's SPV and the commissioning authority, which is usually a government body.
On April 17, SEBI had allowed such SPVs to remain active subject to certain conditions.
With the latest circular, the regulator has specified the conditions that the investment manager has to meet with respect to these SPVs.
The investment manager now has to exit such an SPV within a year from the termination of the concession agreement, the conclusion of all pending claims/litigations/tax assessments and related appeals, or the completion of defect liability period.
This one-year deadline will not include the time taken to obtain relevant statutory or regulatory approvals for exiting the investment in such an SPV.
The investment manager will also have to ensure that certain additional disclosures are made on their holdings in such SPVs until their exit from them.
At the InvIT level, disclosures must include a detailed breakup of the value of investments (on both gross and net basis) in such SPVs.
At the SPV level, disclosures must include project details, assets and liabilities, contingent liabilities, repayment schedule, sufficiency of assets to meet liabilities, exit strategy and timeline.
Published by HT Digital Content Services with permission from VC Circle.