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TMI BlogRevised format of security cover certificate, monitoring and revision in timelinesX X X X Extracts X X X X X X X X Extracts X X X X ..... isions of circulars and have also given suggestions on strengthening the said requirements. These challenges were also discussed in SEBI constituted Working Group on Unique Identification Code - Securities Covenant Monitoring System ( Working Group ). After taking into account recommendations of the Working Group and feedback from market participants, SEBI amended the SEBI (Debenture Trustees) Regulations, 1993 , SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and SEBI (Issue and Listing of Non-Convertible Securities) Regulations, 2021 and amendments were notified vide gazette notifications dated April 11,2022. Accordingly, the provisions in the above mentioned circulars have been revised as under. A. Revised format of the Security Cover: 3. In terms of regulation 54 read with regulation 56(1)(d) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 , listed entities are required to disclose security cover to Stock Exchange(s) and Debenture Trustee, and the format for preparation of security cover for listed debt securities was prescribed as per Annexure A of SEBI Circular dated November 12,2020. Based on the reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (g) In case, debt securities are secured by creation of charge on the assets of third party/subsidiary/group/holding company; or assets of the listed entity are offered for securing the debt securities issued by third party/ subsidiary/ group/ holding company; or assets of the listed entity are offered for securing the other liabilities of third party/subsidiary/group/holding company, the listed entity shall make disclosure in two separate tables in the security cover format in the following manner: i. Table for security cover on standalone basis for the listed entity and; ii. Table on net summary basis on consolidated level in order to provide the overall/ holistic picture of the borrowings and security cover provided by the listed entity. (h) Obligations of listed entity in case of third party/ subsidiary/ group/ holding company assets being offered as underlying security: i. The book value for security cover shall be certified by the statutory auditor of the third party/ subsidiary/ group/ holding company with respect to third party/ subsidiary/ group/ holding company assets being offered as underlying security. ii. In case, security cover comprises exclusive c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19890;𝑥𝑐𝑙𝑢𝑠𝑖𝑣𝑒 𝑐ℎ𝑎𝑟𝑔𝑒 / 𝑂𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝑣𝑎𝑙𝑢𝑒 𝑜𝑓 𝑐𝑜𝑟𝑟𝑒𝑠𝑝𝑜𝑛𝑑𝑖𝑛𝑔 𝑑𝑒𝑏𝑡 + 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑎𝑐𝑐𝑟𝑢𝑒𝑑 4.2. Pari-passu security cover shall be calculated in the following manner: 𝑃𝑎𝑟𝑖 𝑝𝑎𝑠s𝑢 𝑆𝑒𝑐𝑢𝑟𝑖𝑡𝑦 𝐶𝑜𝑣𝑒𝑟 = 𝑉𝑎𝑙𝑢𝑒 𝑜𝑓 𝑎𝑠𝑠𝑒𝑡𝑠 ℎ𝑎𝑣𝑖𝑛𝑔 𝑃𝑎𝑟𝑖 𝑝𝑎𝑠𝑠𝑢 𝑐ℎ𝑎𝑟𝑔𝑒 / 𝑂w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y be categorized as financial covenants, affirmative covenants, negative covenants etc. A guidance note for the list of covenants prepared in consultation of Debenture Trustees is enclosed as Annexure II . 8.3. Initiate action in case of breach of covenants viz. accelerated payment, borrowing restriction, not to declare dividend before payment, declaration of event of default etc. in accordance with the terms of issue/ Offer Document/ Debenture Trust Deed. 8.4. Independently monitor any breach of covenants from continuous monitoring of any public disclosure on Stock Exchange(s), company filings, news articles in electronic/ print media or any information available in public domain apart from periodical information/ documents submitted by the issuer company. 8.5. Furnish a status report on its website and to the Stock Exchange(s) for further dissemination on a quarterly basis. Such status report shall contain the covenants breached in the preceeding quarter and the actions taken by the Debenture Trustee(s) for the same as per the format prescribed vide SEBI Circular dated November 12,2020. C. Disclosure by Debenture Trustee: 9. In order to enhance transparency wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decided amongst the Debenture Trustees based upon the amount of the charge each Debenture Trustees holds and accordingly the exercise of carrying out the valuation and preparation of the valuation report may be carried out by the lead Debenture Trustees. 11. In partial modification of the timelines mentioned in para 5 of SEBI Circular number SEBI/HO/MIRSD/CRADT/CIR/P/2020/230 dated November 12, 2020, timelines for the following regulatory compliance is revised as under: Report Periodicity Half yearly compliance report Details of other activities carried out by Debenture Trustee(s) including type of activity, description of activity etc. Half-yearly basis within 75 days of the end of each half-year. 12. It is also clarified that the half-yearly compliance report shall be reviewed by the Board of Directors of the Debenture Trustee prior to the submission to SEBI. E. Monitoring of Recovery Expense Fund (REF) by Debenture Trustee(s): 13. SEBI vide circular numbered SEBI/HO/MIRSD/CRADT/CIR/P/2020/207 dated October 22, 2020 issued guidelines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a (Listing Obligations and Disclosure Requirements) Regulations, 2015 , Regulation 29 of the Securities and Exchange Board of India (Issue and Listing of Municipal Debt Securities) Regulations, 2015 , Regulation 48 of Securities and Exchange Board of India (Issue And Listing Of Securitised Debt Instruments And Security Receipts) Regulations, 2008 to protect the interest of investors in securities and to promote the development of, and to regulate, the securities market. Yours faithfully, Richa G. Agarwal General Manager Market Intermediaries Regulation Supervision Department Email id: [email protected] Phone: +91-22-26449596 Annexure II- Guidance note on list of Covenants Category Sub-type (As applicable) Covenant (As applicable) 1. Accounts/ funds/ reserves maintained Debt Service Reserve amount Interest Service Reserve Account Major maintenance reserve Escrow account/RERA account Debenture Redemption Reserve Debenture Reserve Fund Recovery Expense ..... X X X X Extracts X X X X X X X X Extracts X X X X
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