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DHFL debt investors unlikely to receive payment for now

A three-year bond series worth about Rs 950 crore is due to mature this week.

, ET Bureau|
Aug 12, 2019, 09.26 AM IST
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Agencies
DHFL
DHFL has been facing a liquidity crisis since September 2018 and has paid over Rs 41,000 crore in debt obligations.
Institutions and retail debt investors could be in for a jolt on August 16 with Dewan Housing Finance Corp (DHFL) deciding to hold repayments until lending banks finalise a resolution plan for the company. The investors, including fund houses and hundreds of individuals, are unlikely to receive repayments for now.

A three-year bond series worth about Rs 950 crore, which had attracted record bids in 2016, is due to mature this week, said three people familiar with the matter.

“As part of the debt restructuring process, banks set a cut-off date from where all payment obligations will be made only as per final approved debt resolution plan,” an executive with direct knowledge of the matter told ET.

Mutual funds of asset amangement companies, including UTI, L&T, LIC, DSP Canara Robeco and HSBC, and retail investors subscribed to DHFL’s debt papers. Some mutual funds may have exited earlier this financial year after a few large foreign banks expressed interest in owning them. Axis MF, Baroda MF and BOI AXA are among the fund houses that hold small portions of the bonds.

The home financier continues to receive about Rs 2,400 crore through monthly instalment payments from retail home borrowers.

DHFL launched two public issuances in 2016. In August that year, it had aimed to raise Rs 4,000 crore collectively against which it obtained bids for as much as Rs 19,000 crore.

DHFL and most fund houses did not reply to ET’s email queries. UTI MF confirmed its investment in such securities. Baroda, DSP and BoI could not be reached immediately. HSBC declined to comment.

Fund houses have mostly marked down their investments in DHFL after rating companies downgraded the company to ‘Default’ or D category.

While institutions invested in three-year papers earning 9.10 per cent, retail investors bet on them to earn 10 basis points more than the institutions.

Catalyst Trusteeship Services was the debenture trustee, which is supposed to facilitate investor interest.

DHFL last Thursday said that it wouldn’t be able to meet debt obligations that are due for payment in the immediate future as the resolution plan is still pending with creditors.

“Given the ongoing discussions on the resolution plan with the lenders who have signed the ICA (inter-creditor agreement), the company believes that its payment obligations due in the immediate future may not be met as per their existing schedule (due to the ongoing resolution),” DHFL told exchanges in a filing.

The company, battling a cash squeeze, was in the process of finalising a stake sale with four potential bidders, which has also been stalled.

“The stake sale is on hold until banks put a stamp on the proposed resolution process,” said another executive.

DHFL has been facing a liquidity crisis since September 2018 and has paid over Rs 41,000 crore in debt obligations.

A few DHFL bonds traded in the secondary market at heavily discounted prices. The yields were as high as 67 per cent in June.
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