DHFL’s bondholders get 3-week deadline to get on board with salvage plan
Bondholders of troubled shadow lender Dewan Housing Finance Ltd (DHFL) have been given a three-week deadline to decide if they are on board with a rescue plan being evaluated by banks, according to a letter sent by a custodian of DHFL bond.
The banks have signed an inter-creditor agreement (ICA) to come up with a plan to restructure nearly 1 trillion rupees ($14 billion) of DHFL’s debt.
Now, the bondholders have to communicate by letter by Aug. 26 if they are willing to be part of the ICA.
That turns up the heat on India’s mutual funds, which hold DHFL paper and are scrambling for approval from the market regulator to join the ICA.
While insurers and pension funds have clarity from their regulators and are likely to be on-board with the ICA, mutual funds are yet to get a green light from the Securities And Exchange Board Of India (SEBI), industry sources said.
Last week DSP Mutual Fund, one of the creditors of DHFL, said it had initiated legal action against the housing finance company as 50% of its dues remained unpaid. Since then there have been concerns that others may also take a similar step, delaying the resolution process.
“The signing of the ICA ensures that the parties then can not take any legal action against the company and that is one of the concerns at the moment,” said one of the bondholders who had received the letter, requesting anonymity.
According to central bank regulations, a resolution plan can only go through if three-quarters of lenders by value of the outstanding credit and 60% by number have agreed to it, making it critical for the bondholders to be on-board with the plan.