A Flurry Of Letters

The resolution process at DHFL has seen a series of legal letters from all major bidders since last month.

Adani Group, in November, had chosen to materially change its offer for DHFL by bidding for the entire loan book against its original bid to buy only the wholesale loan portfolio. That prompted Piramal Group to send a letter to the creditors warning them of legal consequences if they accept such an offer.

SC Lowy, too, had written to the creditors citing the bidding rules set by them. The Hong Kong-based stressed asset investor had said it reserves the right to pull out of the process if it disagrees with the way the creditors conduct the bidding.

To avoid litigation and give all bidders a winning chance, the creditors amended the bidding process, allowing them to revise offers and bid for the assets of their choice.

While the bidding process was on, Oaktree Capital earlier this month wrote to the creditors reiterating they follow the rules and consider offers which fully meet the criteria. The international investor warned creditors that any deviation would invite litigation, the three people quoted above said.

After final bids were submitted on Dec. 14, the creditors wrote back to the bidders seeking clarifications on certain aspects of their bids, including the valuation of DHFL’s life insurance business and the way the bidders would treat the additional interest income available on DHFL’s book in the months it would take to conclude the process, among others.

Then on Dec. 21, Ajay Piramal wrote to the financial creditors informing them that the bid submitted by his group held the most amount of value for the creditors, Economic Times reported. The letter was also marked to the Reserve Bank of India Governor and DHFL’s administrator R Subramaniakumar. Not to be left behind, Oaktree Capital also wrote to the creditors claiming that its offer was the highest based on the metrics laid down by the creditors.

In its latest letter, Oaktree Capital has contested that it had reached out to lenders before the bidding deadline seeking clarification about the additional interest income component in the structure of the bid. Since the creditors did not respond, the bidder was forced to not include the component in its bid initially and rectify its offer later.

The confusion is rooted in a point of clarification that creditors sought after bidders submitted their offers on Dec. 14. The creditors had noted that since there could be some delay between the winning bid being approved by courts and the bidder taking over the company, they had asked bidders to confirm whether they were willing to pay the interest income accrued during this period to the creditors.

Oaktree Capital had sought clarification on whether this would amount to a change in the commercials of the already submitted bid on Dec. 14, as such change was not permitted as part of the process. The creditors did not respond to that query, said the people cited above. After noting that competitor Piramal Group had offered Rs 1,700 crore in additional interest income as part of the upfront cash, Oaktree Capital sought to amend its offer after the deadline.

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