DHFL lenders meet bondholders, others on inter-creditor pact; agree to present resolution plan within 7 days

Mumbai: The lenders to the troubled Dewan Housing Finance (DHFL) on Thursday met bondholders and small private sector banks who are new to inter-creditor agreement and discussed their way forward in arriving at a resolution plan for the third-largest mortgage player, sources said.

According to sources, the lenders agreed to allow DHFL to finalise and present a resolution plan to the consortium within seven working days, a report in The Economic Times said.

The lenders are in the process of signing an inter-creditor agreement for the company, which is a must for deciding on a resolution plan under the revised NPA recognition circular issued by the Reserve Bank on 7 June.

Though a majority of public sector lenders have signed the inter-creditor agreement, their private sector peers are yet to do so as are not sure about the process, sources said.

"There is anxiety among private sector lenders regarding the inter-creditor agreement. They are going to be part of the pact for the first time and thus want to understand in details about the implication of the inter-creditor agreement. We want all the players to come to a common platform," a source told PTI.

At the meeting, public sector lenders tried to answer all the queries from all the participants, he said. "Even bondholders wanted to know about the inter-creditor agreement," said another banker.

Representational image. Reuters.

Of the 31 lenders to the company, close to 10 are private sector ones and the rest are state-run banks. Bankers said except one or two state-run banks, all others have already signed the inter-creditor agreement and expect them to come on board next week.

According to the Reserve Bank's revised framework for NPA resolution dated 7 June, if a borrower is reported to be in default by any of the lenders, others should undertake a review of the account within 30 days from the default which will be called a review period.

During the review period, banks may decide on a resolution plan and wherever a plan has to be implemented, all lenders will have enter into an inter-creditor agreement within those 30 days to provide for ground rules for finalisation and implementation of a resolution plan, which should have the backing of 60 percent lenders by the number and 75 percent of the value.

In the case of DHFL, lenders have taken 25 June as the reference date and accordingly the 30-day review period will end on 25 July.

DHFL saw a rash of rating downgrades last month after it defaulted on Rs 1,150 crore to its bondholders due on 4 June. This led to a downgrade of its Rs 850-crore commercial papers to 'default' by three rating agencies. Following this on 11 June, it had paid Rs 962 crore of Rs 1,150 crore debt towards interest on NCD repayments, but again on 25 June, it failed to fully redeem another CP worth Rs 225 crore.

DHFL owes nearly Rs 90,000 crore to banks and other financial institutions, according to its FY18 annual report.

The Wadhawan family, who owns a little over 39 percent in the company, has been looking at various ways of coming out of the stress which first came to light late last year following the IL&FS bankruptcy. These de-leveraging include selling stakes in group entities, including in the flagship to the extent of giving up half of their stake.

Meanwhile, DHFL in an exchange filing denied rumours about its auditors—Deloitte and Chaturvedi & Shah—threatening to resign even before the annual audit for FY19.

The company said these auditors are completing the financial results of the quarter ending March 2019 and also for the full year.

--With PTI inputs