DHFL Creditors Mull Special Option To Repay Retail Depositors, Bond Holders
Financial creditors to Dewan Housing Finance Corporation Ltd. are considering an option where retail depositors and small investors in non-convertible debentures can have their principal dues settled in full.
According to two people with direct knowledge of the matter, creditors led by State Bank of India have proposed that about 5% of the proceeds from DHFL’s resolution process can be set aside for such a settlement plan. The people spoke on conditions of anonymity.
The amount which is set aside by the creditors can be used to settle principal dues of retail depositors and small non-convertible debenture holders up to Rs 5 lakh, the two people said. This could cover nearly 90% of these retail depositor and bondholders, whose investments in the housing financier have been stuck since November 2019.
For those with principal dues of more than Rs 5 lakh, the creditors are proposing a settlement through the usual waterfall mechanism which is followed for companies under the Insolvency and Bankruptcy Code, 2016. In this, unsecured financial creditors such as retail depositors and bondholders get a lower share of the payout than secured financial creditors.
Lenders had considered these options at the recently concluded committee of creditors meeting. To be sure, this is still a proposal under consideration by the creditors and a final decision on the issue will be taken by the creditors after a formal voting process.
BloombergQuint had previously reported that the secured financial creditors of DHFL could consider such an option, since the bidders looking to buy the housing finance company’s loan assets have not made any special arrangements for retail depositors and NCD holders.
The RBI appointed administrator at DHFL and SBI did not respond to queries mailed Tuesday morning.
So far, four bidders are in the race to pick up DHFL’s loan assets.
U.S.-based Oaktree Capital Management is seeking to buy all of the housing financier’s Rs 87,000-crore loan book for Rs 31,000 crore as part of the resolution plan. Piramal Group is looking to purchase just the retail lending portfolio worth Rs 32,000 crore at a price of about Rs 25,000 crore. Hong Kong-based stressed asset investor, SC Lowy is looking to purchase DHFL’s corporate loan book under the resolution process.
Adani Group, which was initially interested in purchasing DHFL’s wholesale loans is now looking to buy all of the loans. Last week, it informed lenders about its decision to materially revise its bid, which led to Piramal Group filing a formal complaint. In its complaint, Piramal Group said if the lenders consider the change in the bid, it could lead to legal hurdles and even Piramal Group’s exit from the resolution process.
A formal resolution plan, which details how Adani Group will be paying the financial creditors is still pending, the two people quoted above said.
DHFL was referred for resolution under the IBC in November 2019 on directions of the Reserve Bank of India. The resolution process has seen considerable delays owing to the Covid-19 pandemic. If the bidders litigate against each other, delays could lengthen.