Oaktree Capital, which is in a tight race to acquire Dewan Housing Finance Limited ( DHFL) has written to the lenders of the mortgage financier urging fair treatment in the evaluation process of its bid. In a letter to DHFL’s Committee of creditors ( CoC), a copy of which was reviewed by Mint, Oaktree cautioned the creditors against being discriminated against due to its foreign credentials. US-headquartered Oaktree which manages over $120 billion in alternative investment funds alleged that it has been subjected to a systematic campaign by vested interest groups to undermine its bid to acquire DHFL which has received competing bids from Piramal Capital and Adani Group. A fourth bidder SC Lowy, a Hong Kong-headquartered stressed assets investor backed out of the race recently alleging unfair treatment by the lenders of DHFL.
“Throughout the bid process, however, Oaktree has been the subject of a sustained campaign to undermine its bid. This has revolved around three main themes: the conditionality of the Oaktree bid, the legality of Oaktree as a foreign investor indirectly holding a majority stake in Pramerica Life Insurance Limited (“PLIL”), and Oaktree as a foreign investor representing an implementation risk,” the letter said.
In the letter, Oaktree said that post the implementation of the resolution plan, it intends to transfer the shareholding in DHFL Investments Ltd into an Indian-owned and controlled Alternative Investment Fund. This is allowed as per IRDAI rules as is evident in the case of Star Health & Alliance Insurance Co. Limited and Max Bupa Health Insurance Company, it said.
The letter comes after both the bidders Oaktree Capital and PCHFL agreed to improve their bids as the sale process entered final negotiations. Piramal had bid ₹32,250 crore in the fourth round, slightly lower than Oaktree’s bid of ₹32,700 crore.
Following the meeting on 18 December, the Committee of Creditors asked these bidders to explain their position on the acquisition of DHFL’s indirect shareholding in Pramerica Life Insurance Ltd (through wholly owned subsidiary DHFL Investments Ltd) and the hold back clause relating to the treatment of the tax liabilities. Holdback entails withholding payment of a portion of the acquisition price until some post closing conditions have been met.
In the letter Oaktree claimed that it has emerged as the highest bidder in all the 3 rounds of bidding, yet there is an attempt to oversee its bid on account of its being a foreign investor. It also expressed its concerns about the resolution process being opaque and also of critical breaches in confidentiality.
“It is a priority of the Government of India to attract foreign investment into India. Foreign investors do not expect to be invited to participate in an auction process, and then be discriminated against on the basis that they are not domestic entities. Foreign investors simply will not understand how the highest bid could not be the winning bid. This will unquestionably deter foreign investors from participating in future resolution processes,” it said.
On Monday, the other bidder Ajay Piramal had written to the CoC making a strong case for the resolution plan submitted by his group. Piramal argued that Piramal Capital & Housing Finance Ltd (PCHFL)’s plan offers high certainty and can be implemented irrespective of the outcomes of the sale of the insurance business.
