SBTL LOAN

AGREEMENT
Presented By:Sumit Kumar Bansal
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Kushagra Kunwar
Manas Malviya Vishal Pathak Shivam Kapoor Farhan Ali Imam

Possible Scenarios After Disbursement of Loan by PNBHFL:

SCENARIO - I
Project Caladium is completed by SBTL but SBTL is not able to make any further sales. That means, only 91 flats that have been already booked are the only source of cash flows for SBTL.

SCENARIO - II
All 152 flats have been booked but SBTL fails to complete the construction of project Caladium due to any reason which is unperceivable as on today.

SCENARIO - III
SBTL is not able to make any further sales apart from 91 flats that have been already booked. Also SBTL fails to complete the construction of project Caladium due to any reason which is unperceivable as on today.
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RISKS TO PNBHFL IN SCENARIO I

If after disbursement of loan Project Caladium is completed by SBTL but SBTL is not able to make any further sales then SBTL will not be in a position to repay its loan because there will be no cash flows.

RISKS TO PNBHFL IN SCENARIO II

If SBTL fails to complete the construction of project Caladium due to any reason after all 152 flats have been booked, then there may be litigation from the side of buyers and SBTL may be forced to return all money which it has collected for booking. PNBHFL has to ensure safety of its Loan in this scenario.
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RISKS TO PNBHFL IN SCENARIO III

After disbursement of loan it is possible that no further sales are undertaken by SBTL and Project Caladium is also not completed by SBTL. PNBHFL has to ensure safety of its loan amount in this possible scenario.

HOW PNBHFL CAN COVER ITS RISK IN CASE OF SCENARIO I

PNBHFL should insert a clause in Loan agreement that PNBHFL will have right to auction 61 flats of Caladium that are unsold, as a remedy in case there is a default and non-payment by SBTL. Even if there is no default by SBTL, PNBHFL should ensure that cash flows from sales of any of these 61 flats remain in Escrow account till 36 months which is the tenure of loan. SBTL should not be allowed to withdraw sales proceeds of these 61 flats from the escrow account during the tenure of loan.
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HOW PNBHFL CAN COVER ITS RISK IN CASE OF SCENARIO II

In the loan agreement PNBHFL should create a mortgage on entire Project land of 14846.90 Sq.mts(3.67 acres). Fair market value of Land is 112.77 Crores. PNBHFL should insert a clause in Loan agreement that PNBHFL will have right to auction the balance unsold project Land (162010 Sq. ft) whose market value is 48.60 crore, as a remedy in case there is a default and non-payment by SBTL.
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HOW PNBHFL CAN COVER ITS RISK IN CASE OF SCENARIO III

PNBHFL should insert these clauses in loan agreement to safeguard itself keeping in mind this possible scenario: The Balance receivables from 91 flats that have been booked in advance are to be deposited into escrow account. Whatever SBTL withdraws from this amount has to be spent only on the project completion and details of how this amount has been spent has to be furnished to PNBHFL regularly. In case there are no further sales and Project Caladium is also not completed then PNBHFL can mortgage the entire Project land of 14846.90 Sq.mts(3.67 acres) whose fair market value is 112.77 crores.
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OUR RECOMMENDATIONS
PNBHFL can sanction the loan of 20 crores. There is no need of any staggered disbursal. However following the loan has to be sanctioned on following terms and conditions: Mortgage will be created on the entire Project land of 14846.90 Sq.mts(3.67 acres) whose fair market value is 112.77 crores by PNBHFL. Cash flows from sales of any and all of the remaining 61 flats will be kept in Escrow account till 36 months which is the tenure of loan. SBTL will not be allowed to withdraw this amount even for the purpose of construction in Caladium. The Balance receivables from 91 flats that have been booked in advance are to be deposited into escrow account. Whatever SBTL withdraws from this amount has to be spent only on the project completion and details of how this amount has been spent has to be furnished to PNBHFL regularly. PNBHFL has the right to auction Project land of 14846.90 Sq.mts(3.67 acres) whose fair market value is 112.77 crores in case Project Caladium is not completed. PNBHFL has the right to auction the balance unsold project Land (162010 Sq. ft) whose market value is 48.60 crore, in case Project Caladium is completed but there is non-payment of loan amount by SBTL.
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THANK YOU
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