When a large infrastructure deal fractures, what determines who gets paid, who survives and who rebuilds is rarely the law alone. It is the structure built before the first default notice was ever sent.
A single drafting gap in a financing agreement can sit dormant for years and then decide, when a ₹20,000 crore infrastructure project falls into stress, whether the asset survives restructuring or is liquidated for a fraction of its worth at signing. That risk sits at the centre of how India finances its largest deals, yet the lawyers who build these structures and the professionals who later dismantle them have long worked in two separate rooms, each largely blind to how the other side’s choices will eventually be tested. Deal lawyers and structurers build these transactions, namely power plants, highways, port terminals, steel plants and data centres. Restructuring professionals take those same transactions apart when they go wrong, and the wall between the two rooms has been costly. Both sides eventually learn that a restructuring succeeds or fails on the strength of the financing structure agreed at closing. This piece examines that connection through three instruments, namely structured finance, acquisition finance and mezzanine capital.
How India’s Largest Deals Are Financed: The Three-Layer Capital Stack
A ₹13,500 crore highway concession or a ₹16,000 crore renewable energy project does not arrive at a banker’s desk as a single loan but as a layered financing requirement, each layer carrying a different risk, price and set of legal rights.
The foundation is senior secured debt, advanced to a ring-fenced Special Purpose Vehicle holding the concession, land rights and revenue accounts. Banks lend against cash-generating ability, not the promoter’s balance sheet, a limited-recourse principle that makes enforcement structurally different from a conventional corporate loan. The Supreme Court in Anuj Jain v. Axis Bank (2020) 8 SCC 401 confirmed how carefully courts examine this when lenders attempt to pierce a Special Purpose Vehicle structure during enforcement.
Senior debt covers 60 to 70 percent of project cost. The gap is where mezzanine finance earns its place, sitting below the senior banks and above the promoter’s equity, priced higher because it recovers last. Mezzanine providers negotiate convertible debentures, warrants or profit participation rights, and in India this capital comes predominantly from Category II Alternative Investment Funds regulated under the Securities and Exchange Board of India Master Circular for Alternative Investment Funds (May 2024).
The third instrument is acquisition finance. It is debt raised not to build an asset but to buy one, secured over shares in the target company. A single transaction engages the Companies Act, Foreign Exchange Management Act pricing norms, Securities and Exchange Board of India takeover regulations and Reserve Bank of India directions on share-backed lending, where one documentation error can make enforcement impossible across all of them. The Reserve Bank of India Draft Directions on Acquisition Finance (October 2025), which for the first time proposes a framework for commercial banks to finance mergers and acquisitions, reflects this gap.
Why the Inter-Creditor Agreement Determines Whether a Restructuring Succeeds or Fails
The document that governs a stressed transaction is not the facility agreement. It is the Inter-Creditor Agreement. Under the Reserve Bank of India (Commercial Banks – Resolution of Stressed Assets) Directions, 2025, lenders must execute an Inter-Creditor Agreement within 30 days of a review trigger and a resolution plan within 180 days, setting standstill periods for junior creditors, the recovery order from asset sales, security release thresholds, and the cramdown mechanics binding a dissenting minority.
When properly built, it holds under pressure, with standstill periods long enough for genuine restructuring. When it fails, the consequences follow a pattern. When a mezzanine tranche is structured as listed bonds, the debenture trustee carries a statutory Securities and Exchange Board of India enforcement obligation and will accelerate the tranche regardless of where the senior consortium stands. Share pledges cannot be invoked without triggering a mandatory open offer under the Takeover Code, and senior banks often cannot agree on whether a default has occurred at all. The Supreme Court in Bank of India v. Sri Nangli Rice Mills Pvt. Ltd. (Civil Appeal No. 7110 of 2025, decided May 23, 2025) held that inter-lender enforcement disputes under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act must proceed through mandatory arbitration, confirming that weak dispute resolution clauses add a separate layer of delay on top of the documentation failure. The restructuring outcome is set at the drafting table, not in any tribunal.
How a Stressed Deal Moves Through Lender Restructuring, Private Credit and Beyond
A structured deal does not fail in one event but moves through stages, with the financing structure determining which tools remain available.
The first response is lender-led restructuring. For a well-built deal, the 180-day window works, with senior banks controlling the process while the mezzanine lender waits, and negotiation producing revised terms and a moratorium. For a poorly structured deal, those days get consumed by disputes over standstill, security ranking and voting thresholds, and the project deteriorates into a recovery exercise.
Where lender-led restructuring fails, private credit refinancing has become the market’s second intervention, with a specialist fund buying dissenting positions at a discount and rebuilding the creditor group around an executable plan. The Infrastructure Leasing and Financial Services resolution is the clearest example, with recoveries reported before the National Company Law Appellate Tribunal reaching ?48,463 crore by September 2025, mostly through asset monetisation and Infrastructure Investment Trust transfers rather than insolvency. A third route also exists in acquisition finance, where the seller accepts deferred consideration tied to agreed future targets, though whether such arrangements can actually be enforced when those targets are disputed depends entirely on documentation quality.
Private Credit as a Last Resort: Powerful Financing, with Serious Documentation Risks
Category II Alternative Investment Funds and offshore vehicles under the Reserve Bank of India Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026 and Foreign Exchange Management Act framework offer terms no bank credit committee will sanction, including bullet maturities of five to seven years, payment-in-kind coupons, equity conversion triggers and security built around promoter shareholding rather than project assets, remaining the only financing available where bank credit is unavailable.
The risk is documentation speed. Private credit deals close quickly, with compressed diligence and subordination terms drafted for commercial workability rather than enforcement under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act or before the Debt Recovery Tribunal. The Reserve Bank of India (Investment in Alternative Investment Funds) Directions 2025 (effective January 1, 2026) add a further layer, capping bank investment at 10 percent of any scheme corpus and mandating full provisioning where exposure exceeds 5 percent in a fund with downstream investment in its own debtor. Deals migrating to these structures face higher legal stakes at every enforcement point.
When the Asset Is Good but the Debt Is Too Much: Infrastructure Investment Trusts and Structured Exits
Many infrastructure projects that enter restructuring are not broken businesses. The toll road is collecting, the pipeline is running, the transmission line is live, but the capital structure has failed. When that happens, the most practical tool is not insolvency but the Infrastructure Investment Trust, which lets a sponsor unlock contracted cash flows, repay lenders and exit a debt structure no longer serviceable as agreed. The Securities and Exchange Board of India (Infrastructure Investment Trusts) Regulations 2014 provide the framework that makes this a mainstream refinancing vehicle in India today.
The instrument is only as good as the documentation behind it. Every transfer needs lender consent, trustee release, government approval and Securities and Exchange Board of India compliance, none of which move on the same timeline. In Kalyani Transco v. Bhushan Power and Steel Limited, Civil Appeal No. 1808 of 2020, 2025 INSC 1165, the Supreme Court first set aside JSW Steel’s ₹19,700 crore resolution plan for Bhushan Power and Steel Limited in May 2025 and then upheld it on review in September 2025, two pronouncements on one plan that say everything about what poor documentation costs at this scale. An acquisition completed in 2021 nearly unwound four years later, the clearest possible warning that no resolution plan is final until its documentation closes every gap a future bench could walk through.
The Structure Is the Restructuring: Why the Closing Documents Decide Everything
Structured finance, mezzanine capital and acquisition finance are the instruments through which India’s largest projects are conceived, capitalised, refinanced and where necessary, resolved. The full arc of a transaction, from term sheet to first stress to eventual exit, is governed at every stage by the financing structure agreed at the outset. What Infrastructure Leasing and Financial Services demonstrated, what Jaypee Infratech established and what Bhushan Power and Steel litigated through two Supreme Court orders in 2025 is that structure, not the asset, decides whether a project survives stress or is consumed by its own enforcement process.
The deal lawyer who builds these structures with discipline, drafting Inter-Creditor Agreements that function and mapping enforcement waterfalls against real values before signing, is effectively the first resolution professional on any transaction. The decisions made at closing are the restructuring, and everything after that is a consequence.
*Anand Kumar Maurya Advocate, practising in Banking & Finance, Restructuring & Insolvency, Project & Infrastructure, and Arbitration Laws.