DHFL Delays Full Payment On Bonds Due On June 4

Dewan Housing Finance Corporation Ltd. delayed payment of interest on non convertible debentures issued to mutual funds and other entities due on June 4, according to three people aware of the details, bringing back into focus the mortgage lender’s liquidity woes.

The housing financier has informed investors that it will make good on the payments later this week, the people quoted earlier said on the condition of anonymity.

In a late evening statement. the company confirmed the delay in interest payments on NCDs but said this delay does not constitute as a default.

“As per the Trust Deed, in the event that payment of interest on the NCDs is not met on the due date, there is a cure period of seven (7) working days to meet the obligation. In case, the non-payment continues post that cure period¸only then the same shall constitute an event of default,” said a company spokesperson in a statement.

According to a senior rating agency executive, who spoke on condition of anonymity, a delay on payment of interest on this specific instrument will constitute a default. The seven-day grace period is given to establish an “event of default”. Such an event could then trigger “cross-defaults” on other instruments where such a covenant is included, this executive explained.

DHFL has been facing liquidity problems since September when defaults by IL&FS Group triggered a credit crisis. Allegations of siphoning funds in January added to its troubles. In February, Harshil Mehta stepped down as chief executive officer but stayed on as executive president of its retail business.

Last month, CARE Ratings and CRISIL downgraded the company’s debt instruments.

DHFL has Rs 8,400 crore in bond repayments due between April 30 and July but had only Rs 2,775 crore in liquidity on-hand as of April 30, 2019, the rating agencies had highlighted. While DHFL expects inflows of close to Rs 6,000 crore through repayments and proceeds from loan sell-downs, the NBFC will need to accelerate sales of developer loans to improve its liquidity position, the rating agencies said.

The mortgage lender had said last month that it will temporarily stop taking fresh deposits and won’t allow deposit holders to withdraw prematurely.

In its statement on Tuesday, DHFL said that that it has made substantial efforts to avoid delays in repaying its financial obligations. The company remains committed to ensuring repayment of all its obligations within the stipulated time, the statement added.

This story has been updated with DHFL’s official response received after it was first published.