Tough call for DHFL lenders as Oaktree just manages to outbid Piramal

US-based asset management fund, Oaktree Capital has emerged as the highest bidder for bankrupt housing finance firm, DHFL by making an offer of Rs 36,646 crore for the entire company which includes deferred payments and Rs 11,646 crore in upfront cash to the lenders.

The Piramal group however offered Rs 10,000 crore in upfront cash and balance of its Rs 35,550 crore offer in deferred payments for the entire company. The company has also made a second offer only for the retail portfolio at Rs 26,500 crore. The Adani group, however, did not make an aggressive bid in the fourth round and was third in the race.

All the offers are made with several conditions and banks will have to take a call on all the offers by evaluating the net present value of each. Lenders are expected to meet in the third week of December to vote on the top two proposals.

As per the offers, Oaktree will keep the life insurance stake held by DHFL in a Trust and once the proceeds of the sale worth Rs 1,000 crore from the sale comes in post regulators approval, it will go to the lenders, said a source close to the development. The Piramal group has decided to make the offer with insurance stake sale proceeds worth Rs 200 crore going to the lenders.

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“There is not much difference between the Piramal and Oaktree offers as both are including Rs 3,000 crore of interest earned on the cash in the books of DHFL,” said a lender source. Excluding that, while Piramal offer for the entire company is Rs 32,350, the Oaktree offer is for Rs 32,646 crore. The banks have a tough call to take on both offers. DHFL has Rs 12,000 crore of cash on its books and all the offers for upfront cash are made based on this cash.

The Adani group, however, decided to make a lower bid than the third round of only Rs 29,860 crore.

SC Lowy, which made a conditional offer of 2,300 crore for the corporate loan portfolio did not make any offer in the fourth round.

A lending source said they will have to carefully study all the offers as Oaktree, which is foreign company, has made deferred payments. “We have to see what guarantees are on the table from Oaktree – if they decide to exit India tomorrow. In the case of Piramal and Adani, lenders have recourse to other measures as they are local companies,” the source said.

The spokespersons of Piramal and Adani group did not comment while Oaktree officials were not available for comment. Interestingly, by making a surprise bid for the entire company and upping the ante, the Adani group however made sure that Indian lenders are getting Rs 4,500 crore more in the fourth round of bidding. The earlier rounds offers by both Piramal and Oaktree were much lower.

With this, the bidding rounds for the DHFL comes to an end unless one of the bidders moves the court or former promoter, Kapil Wadhawan, who has already moved the court, gets a reprieve.

The Indian lenders, mutual funds and provident fund have an exposure of Rs 90,000 crore to the company. Of this, State Bank of India has an exposure of Rs 10,000 crore.

Who bid what?

Oaktree: Rs 36,646 crore with Rs 11,646 crore in upfront cash

Piramal: Rs 35,550 crore with Rs 13,000 cr in upfront cash

Adani: Rs 29,860 cr with Rs 11,000 cr in upfront cash

DHFL: The story so far

• November 2019: RBI superseded the Board of Directors of DHFL and appointed Mr. R. Subramaniakumar as Administrator
• December 2019: NCLT orders bankruptcy process against DHFL after it fails to repay bank loans
• January 2020: Lenders invite EoIs for DHFL and/or its books
• February 2020: 24 cos submit EoIs for DHFL
• October 2020: Only 4 cos submit financial bids

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