Mumbai: Shapoorji Pallonji Group has asked the Reserve Bank of India ( RBI) to give its unit, Sterling Investment Corp, three years to meet enhanced capital adequacy norms in relation to a recent bond issue, said people with knowledge of the matter.
Sterling was recently reclassified as a mid-layer NBFC, facing stricter regulatory requirements. RBI has raised concerns over its capital adequacy — tier I-II capital ratios are required to be at least 15% of risk-weighted assets.
SP Group has just raised Rs 28,500 crore ($3.3 billion) backed by Sterling Investment, a non-banking finance company (NBFC) holding 9.18% stake, valued at $18.6 billion, in Tata Sons. The collateral is meant to reassure investors and support the deal. Shares held by Sterling reflect the historical value of Tata Sons shares; true value will be reflected only in the event of a listing of the Tata group holding company, a banker said.
SP Group holds 18.37% in Tata Sons, valued at over $37.4 billion (Rs 3.2 lakh crore).
Nod Within Four Months
Shapoorji Pallonji Group has pledged the entire stake as collateral in multiple fundraising transactions.
The group will have to secure RBI approval for the three-year deferment within four months of the issuance date, said people close to the matter, failure to do which would constitute a default on the borrowing.
The deal was signed on May 15 and settlement is expected to close on May 21, as reported by ET.
“Within four months of the issuance date, SP Group will have to secure approval from RBI for an extended timeline to meet capital adequacy norms under current NBFC regulations,” SP Group has informed investors, according to an official close to the matter.
The deal includes stringent creditor protection clauses, including a Most Favoured Nation (MFN) clause—mandating a coupon step-up if future borrowings are priced higher—and a 1% coupon increase in case of covenant breaches. The group faces a repayment obligation of Rs 51,000 crore after three years, having recently raised money at a steep yield of 19.75%.
As part of the financing structure, SP Group has committed to listing real estate arm Shapoorji Pallonji Real Estate, and raising Rs 13,000 crore through asset monetisation within 24 months. Any delay in meeting this timeline would also trigger a default.
Large credit funds including Ares Management, Farallon, Davidson Kempner, Cerberus, Pimco, and BlackRock are participating in the debt raise, with Deutsche Bank acting as the sole arranger.
The final redemption date for the debentures will be the earlier of—one month prior to the expiry of the RBI extension timeline for capital to risk weighted assets ratio (CRAR) compliance, or three years from the issue date, according to the term sheet reviewed by people cited earlier.
SP Group declined to comment. The transaction implies a loan-tovalue (LTV) ratio of roughly 14.7%, according to the company’s communication to investors. In addition to the Tata Sons stake, the group has also pledged shares of Shapoorji Pallonji Real Estate, valued at $3.2 billion, as part of the funding arrangement.
An official close to the lenders said none of them are disputing or discounting the value of the Tata Sons shares.
“Of course, lenders will demand their pound of flesh as the shares are seen as illiquid as of today,” the person said. “The regulator's decision is awaited on the matter, which will clearly change everything for lenders and investors. There is substantial value in the real estate monetisation plan, which will also serve as liquid collateral post-listing.”
SP Group has also urged RBI to support a public listing of Tata Sons, stating that such a move would benefit all stakeholders, including the public. According to people aware of developments, the group has formally communicated this view to the regulator and is relying heavily on the possible listing to improve its financial position.
Struggling under a substantial financial burden, SP Group also expressed its concerns to Tata Sons about not being informed of the company’s decision to surrender its registration as an upper layer core investment company to RBI. As an 18.37% minority shareholder in Tata Sons, SP Group had reportedly raised its worries about being excluded from discussions on such a strategically important decision.
Sterling was recently reclassified as a mid-layer NBFC, facing stricter regulatory requirements. RBI has raised concerns over its capital adequacy — tier I-II capital ratios are required to be at least 15% of risk-weighted assets.
SP Group has just raised Rs 28,500 crore ($3.3 billion) backed by Sterling Investment, a non-banking finance company (NBFC) holding 9.18% stake, valued at $18.6 billion, in Tata Sons. The collateral is meant to reassure investors and support the deal. Shares held by Sterling reflect the historical value of Tata Sons shares; true value will be reflected only in the event of a listing of the Tata group holding company, a banker said.
SP Group holds 18.37% in Tata Sons, valued at over $37.4 billion (Rs 3.2 lakh crore).
Nod Within Four Months
Shapoorji Pallonji Group has pledged the entire stake as collateral in multiple fundraising transactions.
The group will have to secure RBI approval for the three-year deferment within four months of the issuance date, said people close to the matter, failure to do which would constitute a default on the borrowing.
The deal was signed on May 15 and settlement is expected to close on May 21, as reported by ET.
“Within four months of the issuance date, SP Group will have to secure approval from RBI for an extended timeline to meet capital adequacy norms under current NBFC regulations,” SP Group has informed investors, according to an official close to the matter.
The deal includes stringent creditor protection clauses, including a Most Favoured Nation (MFN) clause—mandating a coupon step-up if future borrowings are priced higher—and a 1% coupon increase in case of covenant breaches. The group faces a repayment obligation of Rs 51,000 crore after three years, having recently raised money at a steep yield of 19.75%.
As part of the financing structure, SP Group has committed to listing real estate arm Shapoorji Pallonji Real Estate, and raising Rs 13,000 crore through asset monetisation within 24 months. Any delay in meeting this timeline would also trigger a default.
Large credit funds including Ares Management, Farallon, Davidson Kempner, Cerberus, Pimco, and BlackRock are participating in the debt raise, with Deutsche Bank acting as the sole arranger.
The final redemption date for the debentures will be the earlier of—one month prior to the expiry of the RBI extension timeline for capital to risk weighted assets ratio (CRAR) compliance, or three years from the issue date, according to the term sheet reviewed by people cited earlier.
SP Group declined to comment. The transaction implies a loan-tovalue (LTV) ratio of roughly 14.7%, according to the company’s communication to investors. In addition to the Tata Sons stake, the group has also pledged shares of Shapoorji Pallonji Real Estate, valued at $3.2 billion, as part of the funding arrangement.
An official close to the lenders said none of them are disputing or discounting the value of the Tata Sons shares.
“Of course, lenders will demand their pound of flesh as the shares are seen as illiquid as of today,” the person said. “The regulator's decision is awaited on the matter, which will clearly change everything for lenders and investors. There is substantial value in the real estate monetisation plan, which will also serve as liquid collateral post-listing.”
SP Group has also urged RBI to support a public listing of Tata Sons, stating that such a move would benefit all stakeholders, including the public. According to people aware of developments, the group has formally communicated this view to the regulator and is relying heavily on the possible listing to improve its financial position.
Struggling under a substantial financial burden, SP Group also expressed its concerns to Tata Sons about not being informed of the company’s decision to surrender its registration as an upper layer core investment company to RBI. As an 18.37% minority shareholder in Tata Sons, SP Group had reportedly raised its worries about being excluded from discussions on such a strategically important decision.
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