Money & Banking

DHFL lenders eye 51% stake in troubled NBFC

Our Bureau Mumbai | Updated on August 21, 2019 Published on August 21, 2019

The troubled Dewan Housing Finance Corporation Ltd’s (DHFL) lenders are looking to take a 51 per cent stake in the company by converting a part of the debt into equity.

For the conversion, the price could be ₹54 per DHFL equity share as against Wednesday’s closing price of ₹45.60 apiece on the BSE.

Sources said the resolution plan has suggested repaying retail investors holding public deposits (PDs) and non-convertible debentures (NCDs) up to ₹10 lakh in full out of the existing retail asset cash flows at the exiting contracted rates.

In the case of non-retail investors holding PDs above ₹10 lakh, the balance in excess of this amount is proposed to be restructured as per the terms applicable to unsecured lenders.

PDs of non-retail investors would be restructured as with unsecured lenders. Retail investors with more than ₹10 lakh in NCDs are proposed to be paid in full at the existing contracted rates out of the retail asset cashflow. NCDs of non-retail investors are proposed to be restructured as per the terms applicable to secured creditors.

The company is also likely to need a working capital loan of ₹2,500 crore to support its existing wholesale book.

It is likely to get over ₹9,000 crore in net cash flows from retail assets this fiscal and about ₹140 crore from project and mortgage loans. Banks are understood to be currently discussing the resolution plan, which was submitted earlier this month.

₹85,000-crore debt

DHFL, which is the country’s fourth-largest housing finance company, had outstanding debt of over ₹85,000 crore as on June 30, 2019, of which nearly ₹40,000 crore is the exposure of banks, with the rest from mutual funds and insurance companies. Secured loans amount to nearly ₹75,000 crore, while the balance is unsecured.

Rajkiran Rai, MD and CEO, Union Bank of India, had on Tuesday said that converting debt into equity is one of the ideas on the table, and if banks take an equity stake in DHFL, it would be for the short term, until they got a strategic investor in place. Union Bank leads the consortium of 33 lenders to DHFL working on the resolution plan. “Even if banks acquire equity, it will be for a very short-term. But it will become a long-term pain if banks fail to get a good investor and we are not ruling out that eventuality as well,” Rai had told reporters.

The resolution plan may be finalised by next month, but banks are awaiting the go-ahead from SEBI for mutual funds to join the inter-creditor agreement. Insurers are also likely to join the ICA, with the insurance regulator understood to be in favour of the move.

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Published on August 21, 2019
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