Structures and Considerations for Offshore Debt Financing – Finance and Banking


India: Structures and Considerations for Offshore Debt Financing

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Special situations and private credit funds are increasingly looking to the Indian high yield market. As banks face liquidity and risk issues, alternative capital with tailored solutions looks attractive. Typically structured as guaranteed callable bonds with deferred payments until maturity, these bonds may also have built-in equity kickers, in the form of a redemption premium linked to any variable, such as the price underlying stock or cash flows. While offshore capital is interested, currency, tax withholdings, enforceability and regulatory risks mitigate the return profile on a risk-adjusted dollar return basis.

In recent times, there has been a constant push towards the “relocation” of credit structures. Offshore funds set up NBFCs and AIFs that pool offshore capital and deploy domestically. A debate is often which one to choose? We analyze the merits of each home credit vehicle from different angles viz. growth vehicle against return, capital increase, monetization and regulatory barriers. We also analyze structures that allow foreign investors to acquire standard and substandard loan portfolios.

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The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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