Lenders from the Dewan Housing Finance Corporation (DHFL) voted overwhelmingly in favor of the resolution plan presented by the Piramal group on Friday, paving the way for a radical turnaround for the bankrupt company.
While Piramal’s offer received 94 percent of the votes, the US-based Oaktree Capital plan garnered just 45 percent of the creditors committee (CoC) vote.
One banker said Oaktree’s offer was “too complicated” and that there were too many loopholes in its plans, including misleading information about the ratings of future bonds to be issued to lenders.
Piramal, on the other hand, plans to merge its financial services business with DHFL and retain all of its employees. He easily managed to get more than 66 percent of the required votes with all public sector banks in the CoC voting for him, the banker said.
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DHFL was sent to bankruptcy court in December 2019 after the company defaulted on its bank loans worth Rs 90,000 crore. The promoters of the company are currently in jail and face charges of money laundering.
Piramal’s plan will lead to a recovery of Rs 37,250 crore over the next five years for DHFL’s lenders. From your total payment, Piramal will give Rs 12,700 crore as advance cash to the lenders. The higher cash upfront tipped the balance in Piramal’s favor. Under the plan, DHFL’s existing shareholders will get zero value. The offer of the third bidder, Adani, was too low.
Oaktree, which had offered an additional Rs 1.7 billion after the bidding deadline, did not find favor with the lenders.
The CoC will submit the Piramal plan for approval by the National Court of Company Law (NCLT). The merger of Piramal Capital and Housing Finance with DHFL will take effect from the date the NCLT approves the plan, thus adding 4,500 employees to the group and investing Rs10,000 crore of Piramal Capital’s share capital in the merged entity.
For Piramal, the merger with DHFL makes sense as it would give it stable cash flow from retail clients at a time when its own corporate loan portfolio is facing tough times due to the real estate slowdown.
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Lenders are now waiting for Oaktree’s next move, considering it had warned it would take legal action if its offer was not approved. In a letter to the lenders just before the vote, Oaktree had said that its offer was being undervalued by Rs 2,700 crore by the CoC and its advisers, giving the Piramal group an advantage. This includes Rs 1,000 crore set aside by Oaktree from the future sale of DHFL’s life insurance company to the lenders and Rs 1,700 crore of additional interest income, which was offered by the US firm to the lenders two days after the date. limit to submit bids. December 22th.
Oaktree also said that the fair market value of its financial proposal was higher than Piramal’s by Rs 4,503 crore.
But Piramal had raised objections to Oaktree’s plan, saying it could not meet the capital adequacy standards prescribed by the National Housing Board and the Reserve Bank of India, Ajay Piramal, chairman of the Piramal group, wrote in a letter. to the central. Bank.
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