Lenders to recast DHFL loans worth ₹38,000 crore

DHFL owes  ₹38,000 crore to close to 30 banks and its total borrowing stood at  ₹1 trillion as of February

Mumbai: Lenders to Dewan Housing Finance Corp. Ltd (DHFL) have agreed to restructure the stressed home financier’s outstanding loans of more than 38,000 crore.

In a meeting held on Monday, the banks decided to sign an inter-creditor agreement by Friday after DHFL missed interest payments to a few lenders last month. Once the agreement is in place, DHFL will have to submit a resolution plan.

The restructuring plan, which is being prepared under the Reserve Bank of India’s 7 June circular, could include extending the tenure of loans, conversion of debt into equity, fresh working capital and inducting a new management team and financial investors.

“Currently, DHFL is a special mention account-0. Lenders will have to ensure the restructuring is completed by end-September in order to avoid the account being classified as non-performing,” a banker involved in the matter said on condition of anonymity.

Under RBI’s new framework, lenders have 30 days to decide on a resolution plan. The decision of lenders who constitute 75% by value of total outstanding facilities (fund based as well non-fund based) and 60% by number shall be binding on all other lenders.

DHFL’s consortium of lenders comprises close to 30 banks. The total borrowing of the home financier stands at 1 trillion as of February. Among the lenders are State Bank of India (SBI), Axis Bank, HDFC Bank, ICICI Bank and Union Bank of India. SBI has the largest exposure of around 10,000 crore.

According to news reports, private equity firms AION, Lone Star and KKR are in the process of doing due diligence to buy a stake in DHFL.

Over the past few months, DHFL has sold retail loans worth30,000 crore. It has also sold several of its strategic retail assets, including affordable housing arm Aadhar Housing Finance Ltd, educational loan business Avanse and DHFL Pramerica Asset Managers. In January, DHFL sold wholesale loans worth 1,375 crore to alternative investment management fund Oaktree Capital, which buys distressed loan portfolios at a discount.

Last week, DHFL said it was yet to repay 225 crore out of the total 375 crore of commercial paper to a dozen investors. This was the second time in June that the company missed the repayment deadline on a set of outstanding bonds.

On 4 June, DHFL had defaulted on interest payment on its non-convertible debentures, following which its credit rating was downgraded to default, or D, by credit rating agencies Crisil and Icra Ltd.

However, DHFL was able to pay the interest within a seven-day grace period given by the bondholders.

“DHFL’s problem is primarily that of a solvency issue, where lenders have lost faith in the company’s ability to honour their future repayments. That’s why lenders have stopped fresh credit lines to the housing finance company and are looking at a rescue package,” said Asutosh Mishra, an analyst at Ashika Institutional Equity research desk.