Dewan Housing Finance Limited lenders may take 40 percent haircut in resolution plan

Dewan Housing Finance Limited lenders may take 40 percent haircut in resolution plan

Dewan Housing Finance Limited's (DHFL) consortium of lenders has signed the Inter-Creditor Agreement (ICA) for resolution of company’s liquidity crisis, according to media reports.

AgenciesUpdated: Monday, July 08, 2019, 11:27 AM IST
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DHFL management meets MCA top brass over repayment, liquidity |

Mumbai: Dewan Housing Finance Limited's (DHFL) consortium of lenders has signed the Inter-Creditor Agreement (ICA) for resolution of company’s liquidity crisis, according to media reports. According to CNBC-TV18 exclusive, Kotak Mahindra Bank and DCB Bank were yet to sign the ICA as on July 5, and are expected to do so by Monday, sources said. DHFL is a large non-banking financial company (NBFC) with outstanding loans of nearly Rs 50,000 crore to banks. The consortium comprises 31 banks. SBI Caps is drafting a resolution plan that will soon be presented to the lenders. This is likely to comprise of three key parts: restructuring, debt conversion and capital support, the media channel said, quoting a source who is part of these deliberations.

Initial estimates done by banks in consultation with Alvarez and Marsel show that banks will have to take a 35 to 40% 'haircut' on their exposure. A part of banks' exposure towards DHFL's wholesale book is seen as unsustainable, and therefore it may be converted into an equity, or semi-equity instrument like Cumulative Redeemable Preference Shares (CRPS), with a long tenure and nominal coupon rate, said a source. Apart from this, the retail portion of DHFL's books is likely to be restructured, with longer repayment schedule, added another source.

The third leg of the resolution plan would be providing funding support to the NBFC. Banks may have to support DHFL with additional capital support to the tune of Rs 2,000 crore, a banking executive with one of the large banks in the consortium told the media channel. Banks are determined this situation does not blow up into an IL&FS like crisis, and therefore would go to the extent of giving additional capital as well, if needed, said the head of a large bank who wished not to be named citing confidentiality of the matter. DHFL has borrowings of over Rs 1 lakh crore, and banks hold about nearly half of the total debt. The rest is held by mutual funds, depositors and others.

Meanwhile, the company had defaulted on interest payment worth Rs 4.76 crore on nonconvertible debentures due on July 3 and 4. “The gross principal amount on which the default has occurred was Rs 4.75 crore for private placement and Rs 94.05 lakh for public issue of NCDs,” it said in a regulatory filing late on Thursday night. In total, it had issued securities of Rs 50 crore for private placement and Rs 132.34 crore for public issue of NCDs. “We wish to further state that since September 2018, the Company has met liability obligations of more than Rs 41,000 crore,” DHFL further said, adding that it is already in the process of selling down its loan assets including wholesale project loans to make good all its obligations and maintain its 100% commitment to all its creditors as it has done since the liquidity crisis started in September 2018.

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