DHFL resolution plan: Lenders want Kapil Wadhawan to step down as chairman and managing director of cash-strapped firm

Lenders of Dewan Housing Finance (DHFL) have reportedly agreed on a three-level resolution plan that includes conversion of debt to equity and issuance of nonconvertible debentures, a media report said.

Banks have a collective Rs 35,000-crore exposure to DHFL through loans, according to The Economic Times. Bond holders, which include mutual funds, insurance companies and pension funds, also have a Rs 45,000-crore exposure.

In the resolution plan, lenders also have proposed that Kapil Wadhawan should step down as chairman and managing director of DHFL, Financial Express said. Lenders have also proposed that Wadhawan's existing stake be brought down to below 10 percent. The report added that the promoter would also be required to pledge a part of their remaining stake to lenders. Promoter group holding in DHFL is 39.21 percent.

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The beleaguered NBFC has not been able to fulfil its obligations towards debt repayment in the recent past and there have been several cases of defaults on commercial papers and bonds.

A file photo of Kapil Wadhawan, chairman and managing director, DHFL. Image courtesy: @kwadhawan1

The cash-strapped DHFL on Monday said it has defaulted on its financial repayment obligations worth Rs 1,571 crore with regard to the issuance of bonds and commercial papers.

The defaults pertain to three cases with regard to interest payment on non-convertible debentures and commercial papers (CPs), DHFL said in a regulatory filing.

In a break-up, the non-banking financial company (NBFC) said it has defaulted on Rs 46.92 crore towards interest amount on secured NCDs (9.92 percent and 9.40 percent/10 year tenor); on NCDs issued through a public issue for multiple tenors of amount involving interest of Rs 363.77 crore and principal amount of Rs 1,059.91 crore.

Besides, defaults of Rs 100 crore occurred on CPs. The company is estimated to be sitting on a debt-pile of over Rs 90,000 crore.

Last week, DHFL sought Rs 15,000-crore immediate funding from banks for on-lending to retail customers as well as to project developers. Earlier this month, the nearly crippled company had submitted a draft resolution plan to lenders which are yet to be approved by them. Under the draft resolution plan, the company has asked for funds from banks/NHB for restarting retail funding which was stopped after the liquidity crisis hit it last year.

Last month, lenders had signed an inter-creditor agreement (ICA), as mandated by the Reserve Bank in the new NPA resolution/recognition framework effective 7 June.

However, the company had said one of its debenture-trustees Catalyst Trusteeship Services is in the process of seeking consent from the debenture holders to be a party to the ICA.

In a separate filing to exchanges on 8 August, the company said it may not be able to meet its financial obligations in the near future.

"Given the ongoing discussions on the resolution plan with the lenders who have signed the ICA, we believe that our payment obligations falling due in the immediate future, may not be met as per their existing schedule," the company informed the exchanges.

It has been facing liquidity issue since last September and has back paid Rs 41,000 crore of its financial obligations through a combination of securitization of assets and repayment collections since.

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

The NBFC sector has been reeling under stress since the unfolding of the IL&FS liquidity crisis in September 2018 due to alleged fraud and mismanagement issues.

With agency inputs