Lenders Agree To Restart Lending Operations In DHFL

Lenders to Dewan Housing Finance Corporation Ltd. have agreed to restart lending operations, a person close to the development said on condition of anonymity as the discussions are confidential.

The housing finance company will resume lending up to Rs 500 crore a month, the person said. DHFL has approximately Rs 2,000 crore it has collected from borrowers over the last few months, which will be used to lend further. The lending operations could start this month, the person said.

The company has not been repaying dues to its lenders as it is currently under the insolvency and bankruptcy code. Borrowers under the code are protected by a moratorium, where repayments are kept on hold till the resolution process is completed.

Restarting lending operations will protect value in the company, as the administrator appointed by the Reserve Bank of India looks to find buyers for the franchise. Lending has come to a standstill since December 2018, when the company started facing liquidity problems after the crisis in Infrastructure Leasing & Financial Services Ltd. DHFL has also lost employees during this time, the person quoted earlier said.

Mint newspaper had first reported on Monday that DHFL’s lenders had approved a plan to restart lending.

Lenders to the company have been attempting to find a resolution plan for DHFL since July 2019, when they first signed an inter-creditor agreement as per the RBI norms. The lenders had rejected a resolution plan proposed by the company, where it had sought repayment over 16 years to secured creditors, including banks and mutual funds.

The lenders had then decided to split the company into sustainable and unsustainable parts, so it may be sold to various buyers. The RBI, however, rejected this plan since it required the lenders to hold the unsustainable parts in a trust till a buyer is found.

On Nov. 20, the RBI superseded DHFL’s board and appointed R Subramaniakumar as the administrator for the company, under the newly amended IBC. The National Company Law Tribunal then admitted the housing finance company under insolvency last month.

Financial creditors to the company have made claims worth nearly Rs 87,000 crore. Of this, more than Rs 45,000 crore worth claims came from bond holders. State Bank of India with claims worth over Rs 10,000 crore is the largest individual lender to the company.

Subramaniakumar and SBI did not respond to queries mailed on Monday morning. The story will be updated once the responses are received.