Revised format of security cover certificate, monitoring and revision in timelines
Summary
This section revises the format for security cover certificates and establishes new timelines for monitoring by Debenture Trustees. It mandates that listed entities prepare quarterly security cover certificates certified by statutory auditors, detailing both book and market values of assets. The text further outlines specific calculation methods for exclusive security cover ratios and obligations regarding third-party or group assets. This section defines the calculation formulas for exclusive and pari-passu security cover ratios. It mandates that security cover certificates must bear a UDIN and prohibits qualifications that impair debenture holders' rights. Additionally, it outlines Debenture Trustee obligations regarding covenant monitoring, disclosure timelines, and the verification of Recovery Expense Funds. Paragraph 17 mandates that Stock Exchanges disclose created REFs and Debenture Trustee details on a half-yearly basis. Paragraph 18 establishes the applicability dates, specifying October 1st, 2022 for security cover formats and covenant monitoring, while other provisions take immediate effect. Paragraph 19 cites the statutory powers under which SEBI issues this circular to
Text
The security cover format has been revised to provide a holistic picture of all borrowings and encumbrance status; the previous format stands rescinded.
The listed entity shall prepare the security cover certificate on a quarterly basis, and the statutory auditor shall certify the book values of the assets provided.
The listed entity shall provide values in the market values column including the reference date; if market value is not ascertainable, carrying/book value may be provided with justification.
Valuation frequency follows SEBI-prescribed guidelines; where no regulatory guideline exists, valuation shall be on a quarterly basis.
If an issuer has more than one Debenture Trustee, the listed entity shall prepare the certificate separately for each Debenture Trustee.
Assets that are not paid for shall not be included as part of any security cover calculation.
If security cover comprises only the assets of the listed entity, the security cover shall be prepared on a standalone basis.
For third-party/subsidiary/group assets, disclosure must be made in two separate tables: standalone basis for the listed entity and net summary on consolidated level.
The book value for security cover involving third-party/subsidiary/group assets shall be certified by the statutory auditor of that respective entity.
An additional column named 'Debt not backed by any assets offered as security' shall be incorporated to capture unsecured debentures and subordinated debt.
The Debenture Trustee shall certify the market value of assets based on due diligence on a quarterly basis and submit the certificate per Annexure I.
In case of reduction in computed security cover value compared to the previous quarter, the Debenture Trustee shall record the reason for such variation.
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Source: SecMarx — Revised format of security cover certificate, monitoring and revision in timelines. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.