Recovering dues: Most MFs may not sign ICA but still back resolution plan for DHFL

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Mumbai | Updated: September 10, 2019 5:38:38 AM

Most Mutual Funds that have an exposure to Dewan Housing Finance (DHFL) are unlikely to sign the inter-creditor agreement (ICA) but will nonetheless lend their support to a resolution plan.

At least two mutual fund houses — DSP Mutual Fund and IDBI Mutual Fund — have initiated legal proceedings against DHFL

By Chirag Madia & Mitali Salian

Most Mutual Funds that have an exposure to Dewan Housing Finance (DHFL) are unlikely to sign the inter-creditor agreement (ICA) but will nonetheless lend their support to a resolution plan. These funds have not segregated their portfolios after DHFL defaulted on repayments, unlike Tata Mutual Fund. However, Tata MF is yet to sign the ICA.

The Securities and Exchange Board of India (Sebi), in its letter to the Association of Mutual Funds in India (Amfi), had stated that fund houses could sign the ICA after the segregation of portfolio pursuant to a credit event.

Back in June, bankers had indicated to FE that they expected to execute the resolution plan by September 25 as further delay beyond this month would entail classification of the account as a non-performing account.

At least two mutual fund houses — DSP Mutual Fund and IDBI Mutual Fund — have initiated legal proceedings against DHFL. DSP Mutual Fund had an exposure of Rs 150 crore to Commercial Paper (CP) with a scheduled maturity on June 25, 2019.

The company had made part payments of Rs 60 crore on June 25, 2019, and Rs 15 crore on June 28, 2019. On September 7, 2019, DHFL informed the exchanges it had paid the balance of Rs 75 crore, resulting in complete recovery for the CPs held by various schemes of DSP Mutual Fund. IDBI MF also received the balance amount of Rs 12.5 crore on Saturday.

Meanwhile, Catalyst Trusteeship (CTL), the debenture trustee for retail and institutional bond investors, including some gratuity and pension funds of DHFL, had given debenture holders until September 4 to send in their consent on acceding to the inter-creditor agreement on a series wise basis. Catalyst is the trustee for nearly 87,000 bond holders of DHFL and it had outsourced the task of collecting and collating the consent of investors to the firm Link Intime India. Sources indicate they will know by this week end how many have assented to letting CTL accede to the ICA on their behalf.

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