Financial Daily from THE HINDU group of publications
Friday, Feb 07, 2003
Financial Daily from THE HINDU group of publications Friday, Feb 07, 2003 |
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Corporate
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Overseas Borrowings Government - Policy Cos can prepay FCCBs from local borrowings Our Bureau
NEW DELHI, Feb. 6 THE Government has allowed companies to prepay their foreign currency convertible bonds (FCCBs) through locally mobilised resources, while relaxing the existing five-year minimum maturity condition for a period till September 30. In other words, companies can redeem their FCCBs ahead of the scheduled conversion date. "The provision of pre-payment (premature purchase) of existing FCCBs will be available up to September 30, 2003. The existing condition of minimum maturity period for redemption of bonds (i.e. 5 years) is put on hold till September 30, 2003", a Finance Ministry release stated here today. The Ministry, however, made it clear that companies would not be permitted to raise fresh external commercial borrowings for making these prepayments. "This scheme is available under the automatic route up to a limit of $100 million if the prepayment is made out of local resources and without any limit if prepayment is out of EEFC (Exchange Earner Foreign Currency) funds or inward remittances towards equity," the release added. While the issuing company would have the right to initiate the process of pre-payment, the actual deal would however have to be subject to the consent of the FCCB holder. The pre-payment cannot be made at above the face value of the bond, which would be inclusive of all expenses for such buyback. Further, the bonds once purchased stand cancelled and cannot be re-issued or re-sold. After completing the transactions, the companies will have to furnish full particulars regarding the number of bonds repurchased, the rate of repurchase (including expenses, if any), the number of residual bonds, sources of funds, etc to the Finance Ministry as well as the Reserve Bank of India within 30 days.
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