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DHFL’s resolution plan hits a major roadblock
- Only a small segment of bondholders have agreed to be on board the proposed resolution
- The process has been further complicated as certain bondholders have also initiated a process to take DHFL to bankruptcy court
Mumbai: A plan to rescue India's debt-laden Dewan Housing Finance Corporation Ltd (DHFL) has hit a major roadblock as only a small segment of bondholders have agreed to be on board the proposed resolution, according to a custodian of DHFL bonds.
The process has been further complicated as certain bondholders have also initiated a process to take DHFL to bankruptcy court, the custodian added.
Out of the 87,000 debenture holders who had been asked to be party to the resolution plan being deliberated upon by banks, only 24,400 debenture holders, or less than 30%, had responded before the due date earlier this month.
The banks have signed an inter-creditor agreement (ICA) to come up with a plan to restructure nearly ₹1 trillion ($14 billion) of DHFL's debt. They had been trying to get bondholders on board as well for the plan to succeed.
Under new central bank rules for resolving bad debts, it is mandatory for 75% of lenders by value and 60% by number to sign the ICA to execute a revival plan which in DHFL's case can be achieved only with the support of bondholders.
Banks, with an exposure of just about ₹36,000 crore, will need support from insurance companies, pension funds and other institutional investors to approve the resolution plan, the deadline for which ends on 25 September.
DHFL, one of the largest housing finance companies in India ran into trouble last year soon after the collapse of IL&FS, a shadow banking behemoth. Troubles at both lenders have sparked an acute liquidity crunch which may worsen.
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First Published:17 Sep 2019, 10:31 PM IST
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