DHFL got 7 days grace period, after failing Rs.1,000 crore plus obligation deadline.

By Abhay Harish Shah, Realty Quarter

On Tuesday the Dewan Housing Finance Ltd (DHFL) was supposed to pay the outstanding bonds but, the deadline is passed and the payment is still on due. DHFL has got 7 days grace period later. The company is in discussion with financiers who can help to meet its Rs.1,000 crore plus obligation and safeguard them from becoming a defaulter.

Many sources in the industry have said that the UTI Mutual Fund and certain lenders in the private industry, including Axis Bank and IndusInd Bank, were among those who sold DHFL debt last year. It is also said that certain individual investors have invested in this.

The firm attempted to combine certain securitization arrangements with two or three selected banks, but this did not succeed.

According to the rules & regulations, the Debentures Trust Deed gives a grace period of 7 days within which interest payments can be made. In order to prevent any redemption pressure from rich investors, MFs will have to decrease the net asset value of (NAVs) by around 75% for the DHFL tools in case of payments delays.

The home financier raised around Rs.11,000 crore in June last year through public issue of bonds. These non-convertible loans (NCDs) provided annual returns to investors in maturities between 8.90% and 9.10%. The custodian of the bond sale was the Pune-based Catalyst Trusteeship.

Since September, when IL&FS failed to pay on its commitments, DHFL has been experiencing a money crunch. The home financier has so far adopted a two-way strategy in raising funds.

While it is in talks with international private equity players to sell the promoter stake strategically, it has also been selling down loan portfolios. This route is used to sell loans to banks at a negotiated cost for para banks and home financiers.

DHFL sold retail loans of around Rs.30,000 crore via securitisation since the beginning of the liquidity crisis in September. The home financier paid approximately Rs.40,000 crore for economic commitments in this time span.

DHFL has also held negotiations with US-based Oaktree Capital for the unloading of Rs. 17,000-18,000 in real estate loans and has signed a non-binding agreement to this end.

In the next few days, the suggested Oaktree agreement should be signed and bondholders would take a breath of relief.

With stricter conditions, it is expected that some large state-owned companies are expected to extend credit lines to DHFL.

Another rating firm may consider the latest missing interest payments to decrease DHFL debt securities to default unless it has been required to recruit cash so that it meets its bonds within the grace period.