Reliance Nippon Life Asset Management has moved the Bombay High Court against stressed non-banking finance company (NBFC) Dewan Housing Finance Corporation (DHFL) to recover about Rs 478 crore.
The counsel for DHFL said the company defaulted on the payment of about Rs 200 crore in the month of May. The company is seeking its dues after the non-convertible debentures (NCD) that the mutual fund house had subscribed, which were due but the NBFC failed to repay the same.
On Monday, Justice AK Menon, in his oral order, restrained DHFL from paying anyone except salaries and other expenses that happens in normal course of business until Friday. Meanwhile, DHFL will file its reply in the petition filed by the Reliance AMC. The court posted the next date of hearing on Friday.
Reliance AMC, now seeking the court’s intervention in the dispute, has total dues of Rs 478 crore. Bondholders have Rs 41,000 crore exposure to DHFL and banks have Rs 27,527 crore. While banks and NBFCs have signed the proposed resolution, some mutual funds have reservations signing it. State Bank of India has already approached Securities and Exchange Board of India for a one-time exception to the rule on segregation of assets that will allow mutual funds to be part of the resolution plan, ET had reported earlier.
“It looks like mutual funds want to get preferential treatment,” said a source familiar with the development. “Sebi has allowed MFs to be part of ICA but if it is not part of segregated fund they cannot sign ICA but still go ahead with the plan and join other lenders.”
According to the proposed resolution plan, yet to be approved by all lenders, any liquidation value required to be paid to the dissenting creditors under the ICA will be paid within a period of 12 months. DHFL has proposed that the exposure of lenders be partly converted into equity at an assumed price of Rs 54 per share under a formula that prescribes a the certain percentage for each category, such as banks and debenture holders. Following the conversion, lenders will acquire a 51% stake. The company has secured debt of Rs 74.054 crore and unsecured debt of Rs 9,818 crore.
“So far, the company has paid to few unsecured creditors but not us, this is an unfair preference,” argued counsel for Reliance Nippon Life in the court. Senior counsel Iqbal Chagla, along with Zal Andhyarujina and Prateek Mishra of law firm L&L Partners, are representing Reliance AMC in the case.
As per the proposal, in addition to the conversion of debt to equity, liabilities will be restructured into term loans and nonconvertible debentures (NCDs) linked to cash flows from segregated portfolios of the company. DHFL chairman Kapil Wadhawan has however assured lenders and investors that all repayments under the plan will be significantly higher than the liquidation value.
When contacted, Munaf Virjee, founding partner of the law firm, ABH Law, who is advising DHFL and Kapil Wadhawan in the case, refused to divulge any details. An email query to Reliance Nippon Life Asset Management remained unanswered till the time of filing the story.
Shares of DHFL fell 8.40% to Rs 38.70 on the Bombay Stock Exchange on Monday.
Source: Economic Times