DHFL Resolution: Bankers could take a haircut on interest exposure

Mumbai | Published: August 7, 2019 6:10:56 AM

DHFL, DHFL resolution plan, Deloitte Haskins & Sells LLP, National Housing Bank, Bankers had earlier indicated DHFL may be given a short-term finance (duration of one year) to restart lending operations.

By Mitali Salian, Chirag Madia & Shritama Bose

Bankers to Dewan Housing Finance Company (DHFL) may be staring at a haircut of between 30-50% on the interest component of their exposure, senior bankers indicated to FE. While DHFL’s resolution plan does not propose a haircut on the principal, only a moratorium, no specifics have been given on the interest component. The cash-strapped home loan financier owes banks `38,000 crore and an additional `34,000 crore to bondholders.

The company’s shares rose 32% on Tuesday, over Monday’s close, to end at `55.4 apiece, the steepest rise since March 1992. DHFL is expected to seek a moratorium on some part of its debt till its cash flows stabilise and operations resume. The plan envisages that lenders will not charge the interest rate on loans. A banker aware of the developments told FE the retail book was of good quality. “However, we may need to infuse additional funds to get the business going and we are assessing the sustainable debt,” he said.

Bankers had earlier indicated DHFL may be given a short-term finance (duration of one year) to restart lending operations. The lender would then at the end of the year securitise the debt with the same banks.
Meanwhile, mutual funds, which have an exposure of `2,200 crore to the company via NCDs and `180 crore of CP, are awaiting a green signal from the Securities and Exchange Board of India (Sebi) on whether they can sign the inter-creditor agreement (ICA).

Banking sources told FE a communication had been sent to Sebi by the banks requesting the regulator to allow the mutual funds to be given permission to sign the ICA. Also, mutual funds did not want to sign the ICA without seeing the resolution plan, as it would in effect be surrendering their rights to future legal action.

A fund manager, on condition of anonymity, told FE, “As of now, we have not received the resolution plan. I don’t think we will get the resolution plan as we are not part of the ICA. We have asked the market regulator (Sebi) to allow us to be part of the ICA, but we have not got any answer from the regulator. In our meeting with the regulator, we had also asked it to allow us side-pocketing, but there is no clarity on that as well.

Mutual funds told FE that the company is currently seeking partial interest write-offs from lenders coupled with elongation of maturity. However, mutual funds have sought to be paid on the basis of the present value as they cannot afford to grant either a moratorium or elongation of maturity. It is largely believed the lenders will share and discuss the plan with mutual funds and other institutional bond holders before going ahead.

DHFL was lending `4,000 crore a month before it was beset with liquidity problems and hopes to be able to lend `1,500 crore a month once the issues are sorted out. Lending operations at DHFL have completely come to a standstill and the employee strength had come down significantly.

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