Scheme for Sustainable Structuring of Stressed Assets (S4A):
- Launched by RBI
- Aims to help resolve the corporate debt problem and strengthen the lenders’ ability to deal with stressed assets.
- Under this scheme, a company’s debt is bifurcated into two parts sustainable and unsustainable based on the cash flows of the company’s project.
- The sustainable debt cannot be less than 50% of existing debt and will have to be serviced over the same terms as that of existing facilities.
- The unsustainable debt can be converted into equity, Optionally Convertible Debentures or Redeemable Optionally Convertible Preference Share with clearly spelt out terms.
- Banks can sell this stake or equity to a new owner who will have the advantage of getting to run the business with a more manageable debt.
- Banks or lenders will formulate the resolution plan and implement the same along with necessary internal approvals.
- RBI mandated advisory body called Overseeing Committee (OC) will be constituted, which will review the resolution plans submitted by the Banks.