DHFL: Draft resolution plan no longer valid following commencement of insolvency proceedings

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January 28, 2020 12:45 AM

The plan also stated that the proceeds from DHFL’s project loan assets would be used to repay around Rs 12,000 crore of debt at a proposed internal rate of return of 8.5%.

The company specified further that draft resolution plan was no longer valid following commencement of insolvency proceedings against it in November last year under the Insolvency and Bankruptcy Code (IBC).

The troubled mortgage lender Dewan Housing Finance Corp (DHFL) on Monday has withdrawn the draft resolution plan it had submitted to lenders in September 2019. DHFL said in a release to stock exchanges that the draft resolution plan, prepared by the erstwhile management of the company “is no longer valid and may no longer be valid”.

“We, hereby, request you to take down/ remove from record, the draft Resolution Plan that was formulated and presented to all its institutional creditors including banks, financial institutions, mutual funds, insurance companies and other institutional bond holders,” the release further added.

The company specified further that draft resolution plan was no longer valid following commencement of insolvency proceedings against it in November last year under the Insolvency and Bankruptcy Code (IBC). The company is now undergoing resolution proceedings under RBI-appointed administrator R Subramaniakumar after the National Company law Tribunal (NCLT) admitted the case on December 2.

As per the draft resolution plan, released by DHFL on September 27, 2019, the company offered an equity stake of 2.3% at a price of Rs 54/share to all lenders in the company. The plan proposed that the first category of debt worth over Rs 34,800 crore would be repaid through inflows from the company’s retail assets, where the projected cash inflow stood at over Rs 52,600 crore by financial year 2034-35. The draft resolution plan stated that the company would use cash proceeds from loan assets over the next 10 -20 years to repay its creditors by issuing pass-through-certificates. Thereby, all retail and whole-sale loan assets of the company would be mapped against the securities it would issue.

The plan also stated that the proceeds from DHFL’s project loan assets would be used to repay around Rs 12,000 crore of debt at a proposed internal rate of return of 8.5%. The plan pegged the projected cash flow from this set of loans at over Rs 21,000 crore over the next 10 years. Additionally, another Rs 35,326 crore of the company’s remaining debt was proposed to be repaid from around Rs 39,000 crore worth of cash.

FE reported earlier that the committee of creditors (CoC) was looking to vote on a proposal of inviting bids for the company in three parts — retail, non-retail and slum rehabilitation authority (SRA) project loans. The troubled mortgage financier has so far received claims for Rs 92,404 crore from creditors, which included financial creditors, operational creditors, deposit holders along with employees and workmen. DHFL owes Rs 45,550.07 crore to bondholders and Rs 41,342 crore to lenders. DHFL is the first non-bank lender to be referred to the NCLT under new rules notified by the government on November 15, 2019. FE also reported that DHFL was planning to commence lending operations soon. To begin with, the lender would look at disbursing Rs 500 crore every month from internal accruals.

On January 16, the CoC approved proposals on cost that would be incurred by the company during the resolution process. This includes Rs 75 lakh per month for advisor to administrator — EY India. The CoC also approved fees to legal advisor AZB Partners, which amounted to Rs 11,500 per hour on a blended basis. The administrator informed the CoC that DHFL’s assets under management stood at Rs 1,19,952 crore.

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