Oaktree provides unconditional, implementable plan for DHFL resolution

By: |
January 7, 2021 6:43 PM

US-based Oaktree Capital has said its revised bid for the debt-ridden DHFL is unconditional and comes with a commitment of fresh capital infusion of Rs 1,000 crore for the revival of the company.

DHFL had total assets amounting to Rs 79,800 crore as of March 2020, as per its annual report.

US-based Oaktree Capital has said its revised bid for the debt-ridden DHFL is unconditional and comes with a commitment of fresh capital infusion of Rs 1,000 crore for the revival of the company. According to sources, Oaktree in a letter dated January 6 to members of the Committee of Creditors (CoC) and administrator of DHFL said the resolution plan offers a clean structure for all stakeholders.

“During our discussion with the legal counsel of the Administrator and the CoC, we were informed that we could not impose any conditions to the implementation of our resolution plan in any manner. As a result, all terms of our resolution plan that could be considered as conditions were deleted,” it said. Revised bids for DHFL were received last month with Oaktree and Piramal Enterprises jostling for the top spot. According to the sources, suitors have submitted bids in the range of Rs 35,000-37,000 crore.

Contrary reports have emerged about who has bid more and Oaktree’s January 6 letter to the CoC is seen as an attempt to clear the air around its bid and claim the highest bidder spot. Sources said Oaktree has presented a legally viable structure in respect of DHFL Insurance Limited’s holding in Pramerica Life Insurance but it remains open to explore any other solution to the satisfaction of the CoC.

“By contrast, we note that the second highest bidder’s bid (Piramal Enterprises) is conditional…,” the letter said.
Based on a fair market valuation, sources said the difference between Oaktree’s offer and the second highest bid is around Rs 4,503 crore.  As part of the resolution plan, Oaktree proposes to delist DHFL and invest Rs 1,000 crore into the company by way of equity or debt, sources said.

In November, 2019, the Reserve Bank referred Dewan Housing Finance Limited (DHFL), the third-largest pure-play mortgage lender, to the National Company Law Tribunal (NCLT) for insolvency proceedings.  DHFL was the first finance company to be referred to the NCLT by the RBI using special powers under Section 227 of the IBC. Prior to that, the company’s board was superseded and R Subramaniakumar was appointed as the administrator. He is also the resolution professional under the Insolvency and Bankruptcy Code (IBC).

As of July 2019, the company owed Rs 83,873 crore to banks, the National Housing Board, mutual funds and bondholders. DHFL was sent to bankruptcy after the government on November 15, 2019, enabled the Reserve Bank to send large financial services companies, excluding banks, to the NCLT for insolvency proceedings. Its large lenders include State Bank of India (including SBI Singapore) with Rs 10,083 crore exposure, Bank of India Rs 4,125 crore, Canara Bank Rs 2,681 crore, NHB Rs 2,434 crore, Union Bank of India Rs 2,378 crore, Syndicate Bank Rs 2,229 crore and Bank of Baroda Rs 2,075 crore, Indian Bank Rs 1,552 crore, Central Bank Rs 1,389 crore, IDBI Bank Rs 999 crore, and HDFC Bank Rs 361 crore.

DHFL had total assets amounting to Rs 79,800 crore as of March 2020, as per its annual report. Of these, Rs 50,227 crore of assets forming 63 per cent of the total portfolio was reported as non-performing assets (Gross NPAs).
Its retail book stood at Rs 33,500 crore, with gross NPAs of Rs 7,147 crore forming 21.32 per cent of the total portfolio. The wholesale book stood at Rs 42,860 crore, of which a whopping Rs 39,690 crore or 92.61 per cent is categorised as gross NPAs.

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