A consortium of 27 lenders, including the State Bank of India (SBI), has signed a pact known as the Interconnection Agreement (ICA) to restructure the debt of troubled mortgage lender Dewan Housing Finance Corporation (DHFL). According to the Reserve Bank`s NPA resolution framework of 7 June, 75% of lenders must agree in value and 60% in terms of figures and sign the agreement between creditors before a resolution plan can be adopted. Some investment funds had separated the bad loans from DHFL in their portfolios by a mechanism known as side pockets. SEBI had authorised this investment fund to join the ICA inter-creditor agreement in August 2019. Mumbai: Lenders of Dewan Housing Finance Corp. Ltd (DHFL) hope to secure a majority in favour of a debt repayment plan from the troubled mortgage lender, even though investment funds have refrained from signing an inter-creditor agreement (ICA), said Rajkiran Rai G., chief executive of the Union Bank of India. The second issue is a commercial issue that fund institutions must take when a debt-to-equity conversion or an extension of the paper term is required. Sebi, the market surveillance authority, has recently sharply reduced the status quo agreements concluded by investment funds with certain companies. The fund manager added that investment funds also need to consult the resolution plan to make a business decision.
However, most fund houses agree that a solution is in everyone`s interest. Most of the investment funds involved in Dewan Housing Finance (DHFL) are unlikely to sign the Inter Creditor Agreement (ICA), but will nevertheless support a resolution plan. These funds did not separate their portfolios after DHFL fell behind in repayments, unlike Tata Mutual Fund. However, Tata MF has yet to sign the ICA. Fund institutions must decide whether they wish to sign the Inter-Creditor Agreement (ICA), as fund institutions do not fall directly under the prudential framework for the resolution of stressed assets issued by the RBI on 7 June 2019. Nor is it mandatory for them to sign such an agreement to be part of a resolution plan. In addition, investment funds must also assess the economic utility of the resolution plan. Investment funds are not sure whether current legislation allows them to sign the ICA with banks and whether they can accept certain commercial conditions mentioned in the ICA.
The banks have signed an agreement between creditors (ICA) to develop a restructuring plan for nearly ₹1 trillion (₹14 billion) of DHFL`s debt. Meanwhile, Catalyst Trusteeship (CTL), the bond agent for private and institutional investors, including some of the DHFL`s tip funds and pension funds, had given bondholders until September 4 to send their consent to join the creditor agreement on a serial basis. . . .