Indian issuers are increasingly selling
securities without consulting their lenders. Herbert Smith
Freehills' Siddhartha Sivaramakrishnan and Gareth Deiner
explain it may make underwriters liable for
Recent offering documents for debt and equity capital
markets transactions in India have made extensive disclosure of
the absence of lender consents for the securities being sold.
These consents are typically required as a result of covenants
in issuers' pre-existing financing arrangements which require
them, as borrowers, to obtain the consent of their lenders
before making a debt or equity offering. Under the terms of
those financing arrangements, failure to obtain consent is
likely to constitute a breach of covenant, which in turn, could
trigger events of default, acceleration and cross-defaults
across other financing arrangements.
Issuers have various reasons for not seeking lender
consents, including accelerated timelines for offerings and the
costs implicit in the actual process of obtaining those
consents. Disclosing the absence...