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DHFL lenders may offer six-month moratorium on loan repayments

During moratorium, DHFL would only pay the due interest on outstanding bonds, sources told ET.

, ET Bureau|
Jul 22, 2019, 08.50 AM IST
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Agencies
DHFL
Under financial stress, DHFL reported net loss of Rs 2,223 crore in the fourth quarter of FY19, compared with a profit of Rs 134 crore in the last quarter of FY18.
Lenders to Dewan Housing Finance (DHFL) may propose this week a six-month moratorium on repayments of around Rs 80,000 crore of outstanding loans under the inter-creditor agreement, with private equity investors likely buying a fifth of the embattled home financier after the debt recast.

During moratorium, DHFL would only pay the due interest on outstanding bonds, sources told ET. The company expects a slightly longer moratorium on principal repayments, said an executive with direct knowledge of the matter. DHFL is also negotiating longer loan repayment tenures of up to 3 years with its bankers.

A new debt restructuring plan will be put up by July 25, and be operational before September 25. The restructuring will enable the infusion of necessary liquidity into the company.

Fresh Funding of Rs 1,200-1,500 crore
Bondholders have Rs 45,000 crore of exposure to Mumbai-based DHFL, while high-street lenders have loaned the home financier another Rs 35,000 crore.

Bond investors and lenders want a sustainable and financially viable solution to the DHFL debt problem, and don’t want a makeshift arrangement leading to steep haircuts.

“Other investors/lenders, besides banks, should also participate in the resolution plan of DHFL to get the value of their investments,” said A Balasubramanian, chief executive officer of Aditya Birla Sun Life AMC. “A balanced resolution plan is the need of the hour to calm the market sentiment instead of extending litigations.”

In the secondary market, DHFL bonds have yielded as high as 67%. Some special-situation funds had offered to buy those papers at heavy discounts. However, only a few trades took place with most investors, including mutual funds and insurers, turning down such lopsided offers.

“We are negotiating for the loans to be extended to up to 3 years without any haircut because the loans are pegged to assets,” said a company executive on the condition of anonymity. “We are also seeking fresh lending of Rs 1,200 crore to Rs 1,500 crore every month to start disbursements.”

DHFL will originate loans for banks with the fresh funding every month.

It is looking to pay Rs 4,018 crore in inter-creditor deposits shortly. The company has raised Rs 205 crore by selling 9.15% in Aadhar Housing Finance and another Rs 340 crore by selling 31% in Avanse Financial Services.

Under financial stress, DHFL reported net loss of Rs 2,223 crore in the fourth quarter of FY19, compared with a profit of Rs 134 crore in the last quarter of FY18. The performance reflected in increased provisions and slowdown in disbursements. It has made additional provisioning of Rs 3,280 crore in the fourth quarter of FY19.
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