Money & Banking

To recover dues, insurers to be part of DHFL inter-creditor pact

Surabhi Mumbai | Updated on July 23, 2019

They are hopeful of getting clearance from the IRDAI

Insurance companies with exposure to troubled Dewan Housing Finance Corporation (DHFL) are likely to sign the inter-creditor agreement (ICA) with lenders to recover dues.

Sources close to the development said insurance companies have already held discussions among themselves and also with the Insurance Regulatory and Development Authority of India (IRDAI) on the issue.

“There is a consensus emerging that insurers should also sign the ICA to ensure that they can recover their investments in DHFL. Talks with IRDAI are also going on,” said two persons familiar with the development, adding that they are hopeful of getting clearance from the regulator as well.

According to sources, with banks already having signed the ICA, the resolution process will now be according to the agreement.

“If insurance companies are not part of the ICA, then recoveries become difficult and will depend on how banks and other lenders choose to proceed,” said an executive with an insurance company, adding that insurers can join the agreement under the new RBI June 7 circular for resolution of stressed assets.

IRDAI has already instructed insurers to classify exposure to Infrastructure Leasing and Financial Services and other defaulting NBFCs as NPAs. However, DHFL exposure has not been categorised as non-performing.

Significantly, bondholders of DHFL, including mutual funds, were part of the initial resolution discussions and talks on ICA

DHFL, which has been in trouble with problems of asset-liability mismatch since last August, has been trying to work out a resolution plan with its lenders.

Despite a series of rating downgrades and defaults on repayments, the troubled NBFC has been hopeful of a full resolution.

According to sources familiar with the development, lenders are willing to give it some working capital, provided the company looks for a strategic investor.

Following a board meeting on July 22, DHFL said it has received non-binding indicative term sheets as part of the proposed corporate restructuring, and any proposals approved will constitute a part of the resolution plan.

“It is in discussions with the consortium of bankers and lenders to restructure its borrowings, and will take all necessary steps to ensure that it meets its financial commitments.

“ There have been discussions for stake-sale by the promoters to a strategic partner with further equity infusion,” it said in a regulatory filing.

Published on July 23, 2019

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