Shapoorji Gets RBI Waiver Averting Higher Yield On Private Debt

India’s Shapoorji Pallonji Group has secured a key regulatory waiver from the banking regulator, easing pressure on its landmark $3.4 billion private credit deal and averting an increase in the cost of that borrowing, according to people familiar with the matter.

Sterling Investment Corp., the group’s non-banking finance unit, last week received a three-year extension from the Reserve Bank of India to meet the capital adequacy norms, the people said, asking not to be identified as the details are private. The extension gives the unit more time to comply with rules on the minimum cash buffers required for India’s shadow lenders.

Lenders required Sterling Investment — which pledged a 9.2% stake in Tata Sons Pvt. as collateral for India’s largest-ever private credit deal — to obtain the waiver by the end of September, or inject 60 billion rupees in fresh capital, according to terms of the deal reviewed by Bloomberg. 

A delay in securing the waiver could have raised the interest rate about 200 basis points above its current 19.75%, the people said. It could have also triggered a default if 50.1% of bondholders had demanded it, the terms show.

Representatives from Shapoorji Group and the RBI did not immediately respond to emails seeking comment. 

The zero-coupon, local currency bonds were placed with marquee global investors including Ares Management Corp., Cerberus Capital Management, Davidson Kempner Capital Management, and Farallon Capital Management. Deutsche Bank AG acted as sole arranger and also participated in the deal concluded in May.