Authorized share capital allowed to be increased from ₹828 crore to ₹1,090.39 crore
Lenders are preparing the resolution plan under RBI’s new framework for stressed assets
Mumbai: Stressed mortgage lender Dewan Housing Finance Corp. Ltd (DHFL) on Friday said its board has approved the plan to convert the whole or part of its debt into shares, besides allowing it to increase the authorized share capital from ₹828 crore to ₹1,090.39 crore.
“(The board has approved) conversion of the whole or part of the debt into equity shares or other securities of the company in accordance with the applicable law with the price of such conversion being in line with the applicable laws and which may result in a change in ownership of the company," the company said in a stock exchange filing.
Earlier this month, DHFL had said that its draft resolution plan, which was submitted to the lenders, spares creditors from having to take haircuts on principal payments.
The lenders are now preparing the resolution plan for DHFL under the Reserve Bank of India’s new framework for resolution of stressed assets released on 7 June. According to the central bank’s circular, 75% of lenders by value of the total outstanding credit facilities to a stressed company, and 60% by number must agree for an inter-creditor agreement which will be binding on all lenders.
State Bank of India has an exposure of about ₹10,000 crore to DHFL, the bank’s chairman Rajnish Kumar told shareholders at its annual general meeting in June. The other lenders include Bank of India, Central Bank of India, Andhra Bank, Canara Bank, Punjab National Bank and Corporation Bank.
As of last December, DHFL had an outstanding debt of ₹1 trillion—38% bank loans, 47% debt market exposure and 10% through deposits.
DHFL was among the worst hit by the liquidity crisis faced by non-bank lenders after Infrastructure Leasing and Financial Services Ltd defaulted on payments last year. The defaults increased the cost of funds and made it tougher for the shadow lender to borrow from banks and the bond market. Without access to fresh funds, DHFL’s lending business grounded to a halt with no fresh disbursements.
Mint reported on 23 August that lenders are set to declare 65% of loans outstanding to the stressed mortgage lender as unsustainable, as part of a debt settlement plan.
Of the total ₹24,700 crore of unsustainable debt, or the portion of loans that DHFL can’t service through its cash flows, ₹760 crore will be converted into equity at ₹54 per share, while ₹8,740 crore will be recast into unsecured debt that won’t generate any interest payments.
The remaining ₹15,200 crore of unsustainable debt will be converted into 10-year non-convertible debentures with a coupon rate of 6% and will be allocated to its lenders.
The ₹13,300 crore so-called sustainable component of bank loans will receive an annual interest of 8.5% and has to be repaid over eight years. The mortgage lender has a total bank debt of ₹38,000 crore as on 31 December, according to the latest available investor presentation.
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