DHFL: Lenders seek clarifications from Oaktree, Piramal on conditions in bids

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Lenders have sought clarifications from the bidders for Dewan Housing Finance Corporation Ltd (DHFL) by December 21 regarding the conditions they incorporated in their bids.

Sources said the Committee of Creditors (CoC) has asked Oaktree Capital and Piramal Capital & Housing Finance Ltd (PCHFL) to explain their position on the acquisition of DHFL’s indirect shareholding in Pramerica Life Insurance Ltd (through DHFL’s wholly owned subsidiary company DHFL Investments Ltd) and the hold-back clause relating to treatment of tax liabilities.

Holdback entails withholding payment of a portion of the acquisition price until some post-closing conditions have been met.

Oaktree and PCHFL have proposed to set aside ₹1,500 crore and ₹300 crore, respectively, out of financial creditors’ entitlement amount in an escrow account in order to meet any tax liability arising due to the potential sale of DHFL Investments Ltd’s shareholding in Pramerica Life Insurance Ltd (PLIL) and any other capital contribution and other obligations of DHFL due to or arising out of its commitments to PLIL and its shareholders.

The CoC is unlikely to accept fresh or revised bids now. Voting on the bids are expected to start on December 23. The claims of DHFL’s financial creditors amount to about ₹87,000 crore.

Oaktree Capital is understood to be the highest bidder at about ₹36,700 crore while Piramal has put in a bid for ₹35,500 crore. Adani Group has bid for DHFL at ₹33,100 crore.

The CoC had earlier met on December 18 and 19 to review the three bids for debt-ridden DHFL.

Lenders are expected to assign higher weightage to the bid that will fetch them the highest upfront cash recovery.

Banks are believed to be keen on finalising the restructuring of DHFL by January to ensure that they can get the dues within this fiscal year. Lenders are evaluating the bids based on four quantitative parameters — upfront cash recovery; net present value of the cash recovery; equity allotment; and infusion of funds in the corporate debtor; and two qualitative parameters — track record of the resolution applicant and key managerial personnel.

The Reserve Bank of India had filed an application for initiation of corporate insolvency resolution process against DHFL on November 29, 2019.

The aforementioned move came on the back of the central bank superseding DHFL’s Board of Directors on November 20, 2019 owing to governance concerns and defaults by the company in meeting various payment obligations.

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