A consortium of 27 lenders, including State Bank of India (SBI), has signed a pact, known as intercreditor agreement (ICA), to restructure the debt of troubled mortgage lender Dewan Housing Finance Corporation (DHFL).
Banks had extended close to ₹40,000 crore loans to the home finance company, and there is a similar amount that DHFL had raised through debt instruments like non-convertible debentures (NCDs).
Among lenders, SBI has the largest exposure of about ₹11,000 crore to DHFL.
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Banks want the NCDs to be a part of the resolution plan. “We will request NCD investors, since their money is involved, to be a part of the plan, so that a comprehensive resolution can be executed smoothly,” a banker involved in the resolution plan said.
Among the 27 banks, most have signed the ICA, with a few remaining due to approvals pending from the relevant authorities. Banks have 30 days’ time to sign the ICA, according to norms.
According to bankers, DHFL has been given seven days to prepare a resolution plan which will be scrutinised by the banks.
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Bankers said the idea was to execute the resolution plan by the end of September by changing the management, so that the account does not become non-performing.
To be sure, DHFL has not defaulted on bank loans till now. Still, banks can go ahead with a resolution plan if there are signs of stress in the borrower account, according to Reserve Bank of India guidelines on stressed asset resolution.
In case DHFL fails to bring in a new investor, the debt will be restructured, which is essentially giving more time to the company to repay. However, in case the debt is recast, banks have to classify the loan as NPA.
DHFL has been scouting for a strategic partner since February. While DHFL has been in discussion with some investors, nothing has been finalised till date.
‘More clarity’
“There is more clarity to investors on DHFL books now as we have done a detailed analysis. So, we expect to bring in a new investor by September,” said a top official of a public sector bank. DHFL plans to raise ₹7,000 crore to ₹8,000 crore from the new investors.
The signs of stress became visible after DHFL delayed repayments to NCD holders, which led to a rating downgrade to ‘default’ by ICRA.
“It was a positive outcome on being part of the ICA…want resolution plan to be a collaborative approach for maximisation of value for all stakeholders,” DHFL sources said, adding that the lenders had appreciated the company’s intent on meeting obligations for almost nine months without any fresh borrowing and business.