U.S.-based stressed asset buyer Oaktree Capital Management proposes to offer more money to financial creditors of Dewan Housing Finance Corp. as the bidding war escalates.
Oaktree Capital proposed to raise its upfront payment for the beleaguered housing finance company by another Rs 1,700 crore, according to two people with direct knowledge of the development who didn’t want to be identified as details aren’t public yet. The investor also offered to pay another Rs 300 crore to fixed deposit holders, the people said.
The Rs 1,700 crore will be paid out from additional interest income that DHFL will accrue from its existing loan book till the resolution process is completed and Oaktree Capital is able to take over the housing finance company.
That comes after the international investor agreed to remove conditions from its Dec. 14 offer. It’s vying with Piramal Enterprises Ltd. and the Adani Group for the struggling mortgage lender.
In its previous offer, Oaktree Capital said that it would place Rs 1,500 crore in an escrow account and transfer the funds after paying out any charges associated with the sale of the life insurance venture of the DHFL group. After lenders objected, the stressed asset investor agreed to add this amount into the initial payout to financial creditors.
The latest changes increased Oaktree Capital’s total offer to over Rs 38,000 crore, the people quoted earlier said. That includes an upfront payment and seven-year non-convertible debentures worth Rs 21,000 crore to be issued by Oaktree Capital to financial creditors.
Piramal Enterprises, the other bidder actively participating in DHFL’s sale, proposed to pay Rs 1,700 crore from additional interest income, the people quoted above said. The Ajay Piramal-owned bidder’s total offer for DHFL stands at over Rs 37,000 crore. It includes Rs 19,550 crore worth of 10-year non-convertible debentures and Rs 150 crore to be paid to fixed deposit holders.
Apart from the two, Adani Group too is also in the race but has yet to revise its repayment plan, the people said.
The offers for DHFL have seen multiple revisions by potential buyers after the Adani Group materially changed its bid in November. It proposed to buy DHFL’s entire loan book, instead of the wholesale loans as it had originally indicated. This led to complaints from other bidders, especially Piramal Group, which raised a formal protest in a letter to the creditors on Nov. 15.
To avoid any litigation, the financial creditors allowed all bidders to revise their offers without placing any restrictions on the kind of assets they were looking to bid for.
The offers will be put to vote by the committee of creditors after they have assigned scores, depending on the merits of the bid. Apart from the value of the upfront payment, the scoring model will also consider the nature of securities issued to creditors, the net present value of the account and what the bidders plan to do with the company after they have purchased it.
BloombergQuint awaits responses to queries emailed on Thursday to the Reserve Bank of India-appointed administrator at DHFL, lead lender State Bank of India, Oaktree Capital and Piramal Group
DHFL owes financial creditors more than Rs 87,000 crore, according to the housing finance firm’s website. The insolvency proceedings initiated in November 2019 have seen considerable delays because of the Covid-19 pandemic.