FOREIGN CURRENCY LOAN AGREEMENT
THIS FOREIGN CURRENCY LOAN AGREEMENT ("Agreement") made at Delhi on this the?????.day of ?????.Two thousand and one between ABC Power Generation Limited, a company registered under the Companies Act, 1956 (Act 1 of 1956) and having its registered office at?????.Delhi, State of Maharashtra (hereinafter referred to as the "Borrower" which expression shall, unless it be repugnant to the subject or context thereof, include its successors and assigns);
AND
THE XYZ FINANCE COMPANY LIMITED , a company registered under the Companies Act, 1956 and having its registered office at ...................................... Delhi (hereinafter referred to as "XYZ" or "Lender" which expression shall, unless it be repugnant to the subject or context thereof, include its successors and assigns).
ARTICLE 1: DEFINITIONS
1.1 The following terms shall have the following meanings:
1. "ABC FC Loan Agreement" shall mean the agreement entered into or to be entered into in respect of the ABC Bank foreign currency loan.
2. "Commitment Charge Lender(s)" shall mean the lender(s) providing fund based or non-fund based finance for Commitment Charges under the Fuel Supply Agreement.
3. "Counter Guarantors" shall mean DEF Bank, GHI Bank and The JKL Bank Limited.
4. "Due Date" shall mean, in respect of:
an instalment of principal, the date on which the instalment falls due as stipulated in Schedule VI hereto; and
II. interest, the date on which interest falls due as stipulated in Schedule V hereto.
5. "Effluent Discharge Agreement" shall mean the agreement entered into between the Borrower and the Government of Maharashtra, dated January 23, 2000.
6. "EPC Contracts" shall mean the agreements entered into by the Borrower in respect of engineering, procurement and construction of the power plant.
7. "Escrow Agreement" shall mean the agreement, dated 27th July, 2000 entered into between Maharashtra State Electricity Board (MSEB), the Borrower and MNO Bank.
8. "FC Lenders" shall mean the Lender, the Power Finance Corporation Limited, the STR Development Bank and the ABC Bank . ?????.Branch.
9. "FC Loans" shall mean the amounts of various foreign currencies specified in this Agreement, the STR FC Loan Agreement, the PFC FC Loan Agreement and the ABC FC Loan Agreement or their equivalents in other foreign currencies used for their purchase, agreed to be provided by the FC Lenders for the Project or as the context requires.
10. "Financing Plan" means the financing plan as described in Schedule III hereto.
11. "Fuel Supply Agreement" shall mean the agreement entered into between the Borrower and?????. Petroleum Corporation Limited, dated January 19, 2000.
12. "GOM Guarantee" shall mean the Guarantee executed by the Government of Maharashtra in favour of the Borrower dated August 7, 2000 with respect to the obligations of MSEB under the Power Purchase Agreement, dated March 31, 1999 and amendment thereof, dated October 9, 2000.
13. "General Conditions" shall mean the General Conditions No. GC-FC-1-88 applicable to foreign currency loans provided by financial institutions as amended and attached herewith to this Agreement.
14. "Guarantor" or "Guarantors" shall mean the XYZ Finance Company Ltd., the STR Development Bank and the ABC Bank.
15. "STR FC Loan" shall mean the foreign currency loan availed or to be availed by the Borrower pursuant to The STR Development Bank Foreign Currency Loan Agreement.
16. "STR FC Loan Agreement" shall mean the agreement entered into or to be entered into in respect of The STR Development Bank Foreign Currency Loan.
17. "FC Loan" shall mean the foreign currency loan availed or to be availed by the Borrower pursuant to this Agreement.
18. "ADIS" shall mean The Asian Development Bank, which has agreed to provide a foreign currency loan to the extent of US Dollar 89,750 Million to the Borrower.
19. "Lead Institution" shall mean the XYZ Finance Company Limited designated by the Lenders and the Commitment Charge Lenders to the Project as their attorney.
20. "Lenders" shall mean the Rupee Lenders, the FC Lenders, Guarantors, the Counter Guarantors, the Working Capital Lender(s) and the Commitment Charge Lenders.
21. "Loans" shall mean the loans, subscription to NCDs, and/or guarantees availed by the Borrower from FC Lenders, Rupee Lenders, Guarantors, Counter Guarantors, Working Capital Lender(s) and Commitment Charge Lenders.
22. "Operations and Maintenance Agreement" shall mean the agreement dated 6th October, 1997 (as amended by amendment, dated May 29, 2000) entered into between the Borrower and UVW Generation Company Limited.
23. "PFC FC Loan" shall mean the foreign currency loan availed or to be availed by the Borrower pursuant to the PFC FC Loan Agreement.
24. "PFC FC Loan Agreement" shall mean the agreement entered into or to be entered into in respect of the PFC FC Loan.
25. "Power Purchase Agreement" shall mean the agreement, dated 31st March, 1999 entered into between the Borrower and MSEB for purchase of electricity generated by the Project.
26. "Project" means the Project to be financed as described in Schedule 11 hereto.
27. "Project Contracts" shall mean each of the following agreements:
(a) Power Purchase Agreement;
(b) GOAP Guarantee;
(c) EPC Contracts;
(d) Operation and Maintenance Agreement;
(e) Escrow Agreement;
(f) Fuel Supply Agreement;
(g) Water Supply Agreement;
(h) Effluent Discharge Agreement; and
(i) Such other contracts, deeds and documents that are entered into and to be entered into by the Borrower in respect of the Project.
28. "Promoters" shall mean Santex Construction Limited, Santex Industries Limited, Santex Investments Limited and UVW Power Generation Company Limited/XYZ Power Co. Limited.
29. "Receivables" shall mean all monies due and to become due to the Borrower at any time including, without limitation, all proceeds of disbursements of the Lenders, subscriptions for shares in the share capital of the Borrower, working capital, cash credit and instruments of similar nature, monies due or to become due to the Borrower under the Project Contracts, and under all performance bonds, letters of credit and instruments of a similar nature issued in its favour in respect of the Project except the refund of Commitment Charges by Hindustan Petroleum Corporation Limited pursuant to the Fuel Supply Agreement.
30. "Rupee Loans" means the loans agreed to be provided by, or non-convertible debentures subscribed by, the Rupee Lenders.
31. "Rupee Lenders" shall mean the XYZ Finance Company Limited, DEF Bank, AAA Insurance and Finance Company Ltd., BBB Insurance Company Ltd., Power Finance Corporation of India and The JKL Bank Limited.
32. "Security" shall mean the security created in favour of the Security Trustee/Lead Institution under Article III of this Agreement.
33. "Security Documents" shall mean the agreements entered into or to be entered into between the Borrower and the Security Trustee for creation of Security.
34. "Security Trustee" shall mean the XYZ Finance Company Limited, the Lead Institution among the Financial Institutions and Banks.
35. "Trust and Retention Agreement" shall mean the agreement entered into or to be entered into between the Borrower, the Security Trustee and the Account Banks.
36. "Water Supply Agreement" shall mean the agreement entered between the Government of Maharashtra and the Borrower dated January 23, 2000.
37. "Working Capital Lender(s)" shall mean the lender(s) providing working capital facilities to the Borrower.
II General Conditions
The FC Loan hereby agreed to be granted by the Lender shall be subject to the Borrower complying with the terms and conditions set out herein and also in the General Conditions, a copy of which is annexed hereto. The General Conditions shall be deemed to form part of this Agreement and shall be read as if they are specifically incorporated herein.
ARTICLE II: AGREEMENT & TERMS OF LOANS
2.1 Amount and terms of loans
The Borrower agrees to borrow from the Lender and the Lender agrees to lend to the Borrower in the foreign currency(ies) specified in Schedule IV hereto, on the terms and conditions contained herein and in the General Conditions, the sums to the maximum extent in the various foreign currencies as set out in Schedule 1.
2.2 Interest
(i) The Borrower shall pay to the Lender interest on the FC Loan at the rate(s) and in the manner provided in Schedule V hereto:
Provided, however, interest on rupee-tied defaulted amounts, arrears of liquidated damages and on sums incurred by the Lender by way of expenses in terms of sections 4.1, 4.5 and 4.7 respectively of Article IV of the General Conditions shall be payable half yearly on June 15 and December 15 each year.
(ii) Disbursements made pending creation of Security as stipulated in Article III hereof, in case of non-creation of final security within 3 months from the date of first disbursement shall carry further interest at the rate of 1% per annum plus interest tax from the date of first disbursement till creation of Security.
2.3 Front end fee
The Borrower shall pay to the Lender a one time front end fee at the rate of 1 % on the amount of the FC Loan plus interest tax on or before the execution of the Agreement.
2.4 Last date of withdrawal
Unless the Lender otherwise agrees, the right to make drawals from the FC Loan(s) shall cease on February 15, 2003.
2.5 Payment
The Borrower undertakes to repay the principal amount of the FC Loan to the Lender in accordance with the Amortization Schedule set forth in Schedule VI hereto.
2.6 Conversion right in case of default
(i) If the Borrower commits a default in payment or repayment of any instalment of principal amount of the FC Loan or interest thereon or any combination thereof under section 10.1 (a), (b) or (c), then the Lender shall have the right to convert (which right is hereinafter referred to as "the conversion right") at its option 20% of the rupee equivalent of the defaulted amount (determined in accordance with section 4.10 of Article IV of the General Conditions) into fully paid-up equity shares of the Borrower, at par, in the manner specified in a notice in writing to be given by the Lender to the Borrower (which notice is hereinafter referred to as the "notice of conversion") prior to the date on which the conversion is to take effect, which date shall be specified in the said notice (hereinafter referred to as the "date of conversion").
(ii) On receipt of the notice of conversion, the Borrower shall allot and issue the requisite number of fully paid up equity shares to the Lender as from the date of conversion and the Lender shall accept the same in satisfaction of the said defaulted amount(s) in respect of the FC Loan to the extent so converted. The part of the Loans so converted shall cease to carry interest as from the date of conversion and the Loans shall stand correspondingly reduced. Upon such conversion, the installments of the Loans payable after the date of conversion as per Schedule VI herein shall stand reduced proportionately by the amount of the FC Loan so converted. The equity shares so allotted and issued to the Lenders shall carry from the date of conversion, the right to receive proportionately the dividends and other distributions declared or to be declared in respect of the equity capital of the Borrower. Save as aforesaid, the said shares shall rank pari passu with the existing equity shares of the Borrower in all respects. The Borrower shall, at all times, maintain sufficient unissued equity shares for the above purpose.
(iii) The conversion right reserved as aforesaid may be exercised by the Lender on one or more occasions during the currency of the FC Loan on the happening of the default as specified in this Section.
(iv) The Borrower assures and undertakes that in the event of the Lenders exercising the right of conversion as aforesaid, the Borrower shall use its best efforts to get the equity shares which will be issued to the Lender as a result of the conversion listed with the Stock Exchange(s) at Delhi and Delhi.
(v) For the purposes of this section, it shall not be construed as a default, if the Borrower approaches the Lender well in advance for postponement of principal or interest as the case may be and the Lender agrees to the same.
ARTICLE III: SECURITY
3.1 Security for the loans
(A) The Loans together with all interest, liquidated damages, front end fee, premia on prepayment or on redemption, costs, expenses and other monies including any increase as a result of devaluation/revaluation/fluctuation in the foreign currencies involved payable whatsoever stipulated in this Agreement shall be secured by:
(a) a first mortgage and charge in favour of the Security Trustee in a form satisfactory to the Lender of all the Borrower's immovable properties both present and future;
(b) a first registered mortgage and charge in favour of the Security Trustee of all of the Borrower's immovable properties in Maharashtra, and all its intangible assets both present and future, and a charge over all Project Contracts, insurance proceeds and bank accounts; and
(c) a first charge by way of hypothecation in favour of the Lenders of all the Borrower's movables, (save and except book debts) including movable machinery, machinery spares, tools and accessories, present and future, subject to prior charges created and/or to be created in favour of the Working Capital Lenders on the Borrower's stocks of raw materials, semi-finished, finished goods, consumable stores, book debts and such other movables as may be agreed by the Lead Institution.
The mortgage and charge referred to above shall rank pari passu with the mortgages and charges created and/or to be created in favour of the Lenders in respect of the financial assistance as set out herein:
_________________________________________________________________________________________
Lender Rupee Term Foreign Currency Guarantee Total
Loan/NCD Loan Amount Assistance^
Amount Amount (Principal)
___________________________________________________
Rs. Crores US $ Rs. us $ Rs. Rs.
Million Crores Million Crores Crores
________________________________________________________________________________________
XYZ F
STR DB
AAA
BBB
PFC
JKL Bank
ABC Bank
DEF Bank
GHI Bank
________________________________________________________________________________________
Total #@
_________________________________________________________________________________________
(B) The Borrower shall make out a good and marketable title to its properties to the satisfaction of the Lender and comply with all such formalities as may be necessary or required for the said purpose.
3.2 Creation of additional security
If at any time during the subsistence of this Agreement, the Lead Institution is of the opinion that the security provided by the Borrower has become inadequate to cover the balance of the Loans then outstanding, then, on the Lead Institution advising the Borrower to that effect, the Borrower shall provide and furnish to the Lender, to the satisfaction of the Lead Institution, such additional security as may be available with the Borrower and as may be acceptable to the Lead Institution to cover such deficiency.
3.3 Pledge of shares
The Borrower shall cause the Promoters to create a pledge in favour of the Security Trustee aggregating 51% of the total issued equity share capital of the Borrower at all times, excluding the shares issued to the Lender pursuant to clause 2.6 or similar provision in agreements with lenders in respect of the Loans.
3.4 Trust and retention account
The Borrower shall enter into a Trust and Retention Agreement and open the accounts described therein in which the proceeds of Receivables of the Borrower would be deposited for the due repayment of the principal amount of the Loans and interest thereon, and all other payments under this Agreement and for making all payments in accordance with the Trust and Retention Agreement. The appointment of the trustee for operating the accounts shall be subject to approval of the Security Trustee.
3.5 Acquisition of additional immovable properties
So long as any monies remain due and outstanding to the Lender, the Borrower undertakes to notify the Lender in writing of all its acquisition of immovable properties and as soon as practicable thereafter to make out a marketable title to the satisfaction of the Lender and charge the same in favour of the Lender, on a pari passu basis with the other Lenders, by way of first charge in such form and manner as may be decided by the Lender.
3.6 Guarantee
The Borrower shall procure irrevocable and unconditional personal guarantee(s) of S/Shri. A and B both joint and several and a Corporate Guarantee of Santex Constructions Limited in favour of Lender for the due repayment of the Loans and the payment of all interest and other monies payable by the Borrower in the form prescribed by the Lender and to be delivered to the Lender before any part of the loan is advanced. The Borrower shall not pay any guarantee commission to the said Guarantors.
ARTICLE IV: APPOINTMENT OF NOMINEE DIRECTOR(S)
The Borrower agrees that Lender shall be entitled to appoint and withdraw from time to time Director(s) on the Board of Directors of Borrower at any time during the currency of this Agreement.
ARTICLE V: SPECIAL CONDITIONS
The FC Loan hereby granted shall also be subject to the Borrower complying with the special conditions set out in Schedule VII hereto.
ARTICLE VI: EFFECTIVE DATE OF AGREEMENT
This Agreement shall become binding on the Borrower and the Lender on and from the date first above written. It shall be in force till all the monies due and payable under this Agreement are fully paid off.
SCHEDULE 1: PARTICULARS OF XYZ FC LOAN
Name of the Lender
Amount in foreign currency
THE XYZ FINANCE COMPANY LIMITED
.. ..............................
?????????
Delhi
US $ ??????Million
SCHEDULE II: THE PROJECT
The Borrower proposes to set up a liquid fuel based combined cycle power project of an installed capacity approximating ????..MW (ISO) at?????..Industrial Development Area, District?????..in the State of Maharashtra. The plant comprises two gas turbine units of approximately?????..MW each and a steam turbine of approximately
........ MW
SCHEDULE III: FINANCING PLAN
Project Cost
(Rs. In crore)
Item
Re Cost
Guidelines for Drafting a Foreign Currency Loan Agreement
A Foreign Currency Loan Agreement is used in international finance when a borrower seeks a loan in a currency different from their domestic currency. It outlines the terms and conditions of the loan, including repayment, interest rates, and currency exchange rates. Here are key considerations when drafting such an agreement:
Title and Parties: Clearly label the document as a "Foreign Currency Loan Agreement" and identify the borrower, lender, and any intermediaries involved, providing their legal names and contact details.
Loan Details: Specify the loan amount, currency, purpose, disbursement conditions, and any collateral or guarantees required.
Interest Rates: Clearly state the interest rate terms, whether fixed or variable, and include provisions for calculating and adjusting interest based on currency fluctuations.
Repayment Terms: Define the repayment schedule, including dates, amounts, and currency conversion methods.
Currency Risk: Address currency risk management strategies, such as hedging arrangements, to mitigate potential exchange rate fluctuations.
Common Mistakes to Avoid: Inadequate Legal Review: Seek legal counsel to ensure compliance with foreign exchange regulations, tax laws, and international financial regulations.
Ambiguous Terms: Ensure all terms are clear and specific to prevent disputes over loan conditions and repayment.
Neglecting Currency Volatility: Assess and account for potential currency fluctuations when structuring the loan and repayment terms.
Lack of Default Provisions: Clearly outline default events and the lender's rights and remedies in case of default.
Ignoring Currency Conversion Costs: Address any fees or costs associated with currency conversion and specify which party bears these expenses.
In conclusion, a well-drafted Foreign Currency Loan Agreement is crucial for international financing transactions. By following these guidelines and avoiding common mistakes, both borrowers and lenders can navigate the complexities of foreign currency loans while protecting their interests and complying with relevant laws and regulations.
Frequently asked questions What is a Foreign Currency Loan Agreement?→ A Foreign Currency Loan Agreement is a legal contract in India that governs loans denominated in foreign currency, ensuring compliance with RBI guidelines and FEMA regulations for cross-border lending.
Is this Foreign Currency Loan Agreement legally valid in India?→ Yes, it is legally enforceable in India provided it adheres to FEMA, RBI approvals, and is properly stamped and registered where required.
What stamp duty is required for a Foreign Currency Loan Agreement in India?→ Stamp duty varies by state under the Indian Stamp Act, typically 0.1% to 0.5% of the loan amount; check state-specific rates and e-stamping options.
In what format can I download the Foreign Currency Loan Agreement?→ Download the Foreign Currency Loan Agreement in editable Word or secure PDF format for easy customization and legal use in India.
Can I customize or edit the Foreign Currency Loan Agreement template?→ Yes, the agreement is fully customizable; modify terms like interest rates and repayment while maintaining Indian legal compliance.
Who should use a Foreign Currency Loan Agreement in India?→ Indian entities borrowing foreign currency from non-residents, such as for business expansion, should use this agreement after obtaining necessary RBI permissions.
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