Indiabulls Housing in talks with Oaktree to raise $200 million in debt

Firms signed a similar deal 3 months ago

Indiabulls Housing Finance is in the final stages of negotiating a deal with Oaktree to raise $200 million (Rs 1,500 crore) in debt, said sources in the know, the second such deal between the two in the past three months.

Like in the previous deal, Indiabulls will pledge some developer loans with the global stressed assets investor, which will come in as a senior lender. Oaktree will have the first right on projects’ cash flows, sources said.

Indiabulls had raised Rs 2,200 crore from Oaktree in June by refinancing part of its real estate deals with the US-based investor through non-convertible debentures. When contacted, Oaktree said: “No comment”. An email sent to Indiabulls Housing Finance did not elicit any response.

Offloading risky loans

Like other non-banking finance companies (NBFCs) and housing finance companies (HFCs), Indiabulls is refinancing its loans to raise liquidity and reduce the share of developer loans, considered riskier in today’s market. 

“It will help in generating liquidity and rebalance our book which is granular. In one year, we want retail loans to be 90 per cent of our loan book,” Gagan Banga, vice-chairman and managing director, Indiabulls Housing Finance told Business standard recently.

“We are also working on two-three other deals,” Banga had said. Indiabulls has a loan book of Rs 69,676 crore as of March 2020 and had around Rs 25,000 crore of developer loans.

Los Angeles-based Oaktree has assets of $122 billion as of June 2020. It deals with credit, real estate, private equity, etc. and has been buying developer loans from HFCs in the country in the last couple of years.

NBFCs and HFCs faced liquidity challenges after Infrastructure Leasing & Financial Services defaulted on its loans in August 2018, following which they started selling loans to generate liquidity.

Oaktree Capital bought loans worth Rs 1,375 crore from DHFL in January last year.

Industry scene

Several NBFCs and HFCsare in talks with special situation funds such as SSG Capital, Oaktree and others to sell or refinance their developer loans.

Piramal Capital & Housing Finance is in the final stages of talks with Apollo Global Management to raise between $300 million and $500 million in a deal similar to the Indiabulls-Oaktree arrangement.

ECL Finance, the NBFC arm of Edelweiss Group, also sold real estate loans worth Rs 4,000 crore to Farallon Capital and SSG Capital, according to recent reports.

Edelweiss Group has recently finalised a sell-down transaction of Rs 4,000 crore with two global investors in continuation of the strategy to move wholesale book into fund format, its spokesperson told Business Standard recently.

“We intend to sell-down another Rs  3,000 crore of wholesale portfolio in FY21 and plan to bring it down to zero in next two years,” the spokesperson had said.

In another development, assets of Embassy Group were merged with Indiabulls Real Estate to create a new company. This is a part of the promoters’ plans to exit the real estate business.