DHFL fails to make payment of commercial paper dues worth Rs 225 crore

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Published: June 26, 2019 12:47:52 AM

Fixed income mutual funds holding in commercial papers (CPs) of DHFL worth over Rs 140 crore will mature on Tuesday.

cricil, care, dhflMarket participants say that on June 4, DHFL had interest and principal payments due to the tune of approximately Rs 1,100 crore to the industry/investors and the company failed to repay on the scheduled date.

Dewan Housing Finance Corporation (DHFL) on Tuesday defaulted on a part of its commercial paper (CP) dues. The company, in an exchange notification, said out of an aggregate amount of Rs 375 crore, it has paid Rs 150 crore on a proportionate basis. The balance amount of Rs 225 crore would be paid in the next couple of days, the company said.

“Pursuant to the downgrade by rating agencies expecting a default for the CPs much before they had fallen due, the mutual funds had already taken a 100% markdown on their CP investments. However, even post these downgrades, the company continued to meet its obligations of CP holders and made good a total of Rs 375 crore of CPs before today,” DHFL said.

Fixed income mutual funds holding in commercial papers (CPs) of DHFL worth over Rs 140 crore will mature on Tuesday. The data from Value Research showed that mutual funds have invested around rs 3,300 crore in various debt papers issued by DHFL as on May 2019.

Schemes such as L&T Money Market Fund, IDBI Ultra Short Term Fund, DSP Strategic Bond Fund, DSP Credit Risk Fund and DSP Low Duration Fund have invested in CPs of DHFL which will get mature on June 25, showed data from Value Research.

Market participants say that on June 4, DHFL had interest and principal payments due to the tune of approximately Rs 1,100 crore to the industry/investors and the company failed to repay on the scheduled date. Later, several of the debt mutual funds had mark-down around 75%-100% of the value of the assets. As per Securities and Exchange Board of India and Reserve Bank of India (RBI) regulations, if even one day’s principal or interest is delayed, it is effectively a default. Later on June 11, DHFL said it has paid Rs 961.95 crore towards interest payable on secured redeemable non-convertible debentures (NCDs). According to the filing on the exchanges, DHFL had stated that payments were made within the cure period of seven working days.

On June 5, 2019, Crisil, ICRA and CARE had downgraded its rating on the CP/non-convertible debentures of DHFL to ‘D’, based on delay in debt servicing due to inadequate liquidity, modest capital position and modest earnings. The rating revision takes into account the recent instance of delay in servicing of obligations with respect to some of the non-convertible debentures by DHFL due to prolonged liquidity stress.

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