Never miss a great news story!
Get instant notifications from Economic Times
AllowNot now


You can switch off notifications anytime using browser settings.
11,914.40-54.0
Stock Analysis, IPO, Mutual Funds, Bonds & More

DHFL may buy back mutual fund bonds at discount

DHFL’s total debt stands at about Rs 84,000 cr and MFs own a small portion of it.

, ET Bureau|
Updated: Oct 23, 2019, 08.42 AM IST
0Comments
BCCL
dhfl-bccl
Banks hold about Rs 40,000 crore of debt with the rest owned by retirement bodies, insurers and retail bondholders.
Mumbai: Dewan Housing Finance Corp Ltd (DHFL) may offer to buy back bonds held by mutual funds at a discount to ensure near unanimity among lenders and allow an exit to those unwilling to be a part of the banks-led resolution process.

Big banks, who are driving the resolution process as part of the RBI circular dated June 7, are keen to have MFs on board to ensure smooth passage for the plan proposed by the DHFL management.

While banks and other lenders can garner the support of about three-fourths of the lending entities even without the backing of mutual funds, they want to avoid legal tangles that may crop up later. Also, some of the lenders such as insurance and pension funds — which had initially approved the banks-led intercreditor agreement (ICA) — are said to be having second thoughts.

“We have heard of such an offer, but it has not reached us yet. Once we receive an offer, we will evaluate it,” said a mutual fund manager involved in the process.

The embattled home financier receives about Rs 2,400 crore from its borrowers every month via EMIs (equated monthly instalments). This money can be used to buy back bonds.

DHFL did not reply to an email from ET seeking comments.
dhfl-graph


Proposal not yet officially tabled

“There were some buyers for the mutual fund debt at a discount a month ago, but there is no concrete proposal as yet,” said another banker, who refused to be identified. “If someone has an alternative plan, it has to be brought before us (the lenders’ committee),” said another banker. The discounted price would be the liquidation value, which could be Rs 25-40 for an investment of Rs 100, said another executive. If permitted, such buybacks may happen over the next one or two years.

Fund houses own about Rs 4,000-4,400 crore of DHFL debt and have already marked down losses. Any such one-off settlement would help increase their investment valuations.

The proposal — which is under discussion — has not yet been officially tabled during lenders’ meetings, sources said. Select banks had held a discussion recently with the DHFL management. Under the ICA, a successful resolution plan needs the approval of at least 75 per cent of lenders by value, and 60 per cent by number.

DHFL’s total debt stands at about Rs 84,000 crore and mutual funds own a small portion of it. Banks hold about Rs 40,000 crore of debt with the rest owned by retirement bodies, insurers and retail bondholders.

Also Read

How are Mutual Funds taxed?

Reliance Mutual Fund renamed as Nippon India Mutual Fund

The best mutual funds for SIP investments

Can these mutual funds deliver?

What are the benefits of investing in mutual funds?

Comments
Add Your Comments
Commenting feature is disabled in your country/region.
Download The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.

Other useful Links


Follow us on


Download et app


Copyright © 2019 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service