Indian shadow bank DHFL submits debt restructuring plan to core lenders

By Reuters On Jul 30, 2019

FILE PHOTO: A woman walks past a Dewan Housing Finance Corporation Ltd. (DHFL) sign outside its office on the outskirts of Mumbai, India, January 31, 2019. REUTERS/Francis Mascarenhas/File Photo

By Nupur Anand

(Reuters) – India’s debt-laden shadow bank Dewan Housing Finance Ltd (DHFL) (NS:DWNH) has submitted a restructuring plan to its core committee of creditors (CoC), two sources involved in the matter said, adding that lead lenders were deliberating over the plan.

DHFL, the fourth-biggest housing finance company in India, has roughly 1 trillion rupees ($14.5 billion) of debt and is in the process of seeking lender approval on a restructuring designed to help it ride out a liquidy crunch and restart its lending business.

Several Indian non-banking finance companies (NBFCs), including DHFL, have been stung by an acute credit crunch sparked by the collapse of Infrastructure Leasing & Financial Services late last year.

The restructuring plan submitted by DHFL includes the founder’s family reducing its stake and a restructuring of loans, said one of the sources aware of details of the plan.

The restructuring could include easier repayment terms, such as longer tenure and reduced interest rates, the source added.

Both the sources asked not to be named because details of the plan had not been made public. DHFL did not immediately reply to an email seeking comment.

Of the total debt, DHFL owes banks approximately 380 billion rupees. The core lenders, including Union Bank (NS:UNBK) and State Bank of India (NS:SBI), are planning to call a meeting with the wider consortium of lenders in the first week of August to discuss the DHFL proposal, one of the sources said, adding that banks are not keen to inject any more capital.

SBI and Union Bank did not immediately reply to emails seeking comment outside business hours.

DHFL’s core lender group consist of seven banks, with nearly two dozen other lenders in the wider consortium.

DHFL’s plan is complicated by the need to secure approvals from mutual funds, insurers and pension funds that have also invested in the company’s debt.

According to Indian central bank’s regulations, three quarters of lenders by value of outstanding credit and 60% by number must agree on a restructuring plan for it to be cleared.

The Mumbai-based housing finance company is fairly confident of getting its rescue package approved soon, a company source had previously told Reuters. However, its auditors had recently raised red flags over the company’s financial health, which could complicate its plans.