Lenders to crisis-hit DHFL lay down conditions for promoters

Lenders to crisis-hit Dewan Housing Finance Corporation (DHFL), in the process of finalising a resolution plan, have discussed broad contours of a “binding agreement” that would lay down conditions for the promoters, led by Chairman and Managing Director Kapil Wadhawan.  

The conditions discussed in the lenders’ meeting on Monday included the pledging of shares by the promoters, providing personal guarantees, and a reconstitution of the company’s board, which would entail the appointment of new directors as well as key managerial personnel. A DHFL spokesperson declined to comment on the matter.

Wadhawan, who attended part of the meeting, apprised the lenders that there were a couple of investors with which the firm was in discussion for a strategic deal and indications were that they would bring in a capital of Rs 7,000-10,000 crore.

The exposure of the consortium of banks in DHFL is around Rs 38,000 crore. The lenders have appointed SBI Capital Markets as advisor and Cyril Amarchand Mangaldas as legal counsel for working on a resolution strategy. They have also discussed the need to appoint a co-advisor to work along with SBI Caps. In keeping with the June 7, 2019, RBI guidelines on resolutionn framework for stressed assets, the lenders discussed the need to execute an inter-creditor agreement for the implementation of a resolution plan. The agreement will be signed on Friday.  

The promoters, who hold 39.21 per cent in the company, were initially open to selling half their stake, according to sources close to them. But they are also ready to give up a majority stake depending on the premium they get on their shares, the sources added. Talks have taken place with three contenders — private equity funds AION Capital (a joint venture between ICICI Venture and Apollo Global Management), True North, and KKR.

DHFL has also had discussions with banks to extend fresh lines of credit, which could be backed by securitsed assets so that they can disburse new loans, which have been stopped for about six months.  

Wadhawan also apprised the lenders about the company’s efforts to meet its debt obligations by securitising the loan portfolios. He also told them the company’s business had been halted in the wake of the recent NBFC crisis. DHFL is in negotiations with banks and other funds to sell close to Rs 6,000 crore of its wholesale loan portfolio, on which it will get a fee and margin from the buyer.

This provides the firm a cushion for paying off about Rs 6,500 crore — due as principal amount of the non-convertible debentures — in July, August and September. The outgo, said the people cited above, stands at slightly over Rs 2,000 crore a month. 

DHFL has sold as much as Rs 41,000 crore of its Rs 78,000-crore retail loan portfolio to banks and others, bringing the same down to Rs 37,000 crore. The proceeds have been utilised in making repayments. Similarly, its total wholesale loan portfolio of Rs 30,000 crore will also reduce by over Rs 9,000-10,000 crore after the proposed sale. It had already sold its wholesale loan portfolio of around Rs 4,000 crore.

The conditions 

• Promoters pledge shares to lenders
• Provide personal guarantees
• Reconstitute the board
• Appoint new directors, key managerial personnel