SEBI begins probe into credit rating for Oaktree’s DHFL resolution plan

Our Bureau Mumbai | Updated on January 08, 2021

Seeks details on the basis of which claims were made by American fund

Market regulator SEBI has begun investigations into allegations against certain credit rating agencies for rating Oaktree Capital’s resolution plan for debt-ridden Dewan Housing Finance Corporation Ltd.

In letters to the DHFL Administrator and the Committee of Creditors, Oaktree Capital has often underlined the efficacy of its resolution plan and unconditionality as well as its AAA credit rating with no contagion risk. SEBI has asked the DHFL Administrator for details on the basis of which Oaktree Capital has made such claims.

According to sources close to the development, the probe relates to unnamed credit rating agencies offering views to Oaktree Capital on a future rating of its DHFL resolution plan and instruments. “Offering such views is in violation of SEBI regulations for credit rating agencies,” said the sources.

SEBI wrote to DHFL Administrator R Subramaniakumar on the issue on January 5 and sought available documents, and the names of the credit rating agencies.

Indicative rating

Under SEBI regulations, credit rating agencies cannot offer an indicative rating of an instrument as it has the potential to mislead investors. An email query by BusinessLine to the DHFL Administrator did not elicit a response.

Oaktree Capital declined to comment on a similar email query from this paper. While it is unclear if the complaint will have an impact on Oaktree’s bid, it has come at a time when the voting process for DHFL is on. Creditors are expected to complete voting by January 14 and the winning bid is likely to be announced later this month.

Oaktree Capital and Piramal Capital and Housing Finance Ltd are the two top suitors for DHFL with both contending that their bids, at a little over ₹38,000 crore, are the highest.

Other contenders include the Adani Group and SC Lowy.

Published on January 08, 2021

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