DHFL lenders sign creditor agreement; may take up to 40% haircut under the resolution plan

The lenders' consortium comprising of 31 banks has signed the Inter-Creditor Agreement (ICA) for resolution of Dewan Housing Finance Limited's (DHFL) liquidity crisis, multiple sources aware of the development told CNBC-TV18.

DHFL is a large non-banking financial company (NBFC) with outstanding loans of nearly Rs 50,000 crore to banks.

Kotak Mahindra Bank and DCB Bank were yet to sign the ICA agreement as on July 5, and are expected to do so by Monday, sources said.

Sources further said that SBI Caps is working on a draft resolution plan that will soon be presented to the lenders. The resolution plan is likely to comprise of three key parts: restructuring, debt conversion and capital support, added a source who is part of these deliberations.

Initial estimates done by banks in consultation with Alvarez and Marsel show that banks will have to take a 35 to 40 percent 'haircut' on their exposure.

A part of banks' exposure towards DHFL's wholesale book is seen as unsustainable, and therefore it may be converted into an equity, or semi-equity instrument like Cumulative Redeemable Preference Shares (CRPS), with a long tenure and nominal coupon rate, said a source.

Apart from this, the retail portion of DHFL's books is likely to be restructured, with longer repayment schedule, added another source.

The third leg of the resolution plan would be providing funding support to the NBFC. Banks may have to support DHFL with additional capital support to the tune of Rs 2,000 crore, a banking executive with one of the large banks in the consortium told CNBC-TV18.

Banks are determined this situation does not blow up into an IL&FS like crisis, and therefore would go to the extent of giving additional capital as well, if needed, said the head of a large bank who wished not to be named citing confidentiality of the matter.

DHFL has borrowings of over Rs 1 lakh crore, and banks hold about nearly half of the total debt. The rest is held by mutual funds, depositors and others.

CNBC-TV18 reported on June 30 that bankers had agreed to sign this ICA by July 5.

Lenders of the NBFC had set June 29 as the 'reference date' and agreed to sign the ICA by July 5 to implement a resolution plan under the Reserve Bank of India's (RBI) June 7 circular. SBI Caps is advising the lenders on the resolution plan, and Cyril Amarchand Mangaldas has been appointed as the consortium's legal counsel, as reported by CNBC-TV18 on July 3.

CNBC-TV18 is awaiting DHFL's response to the story.