The resolution process of the beleaguered Dewan Housing Finance Ltd (DHFL), apparently in its final stages, is causing a lot of anxiety among investors. While holders of non-convertible debentures (NCDs) are expected to be repaid in a couple of days, the unexplained debits and credits in their demat accounts has caused a scare.
On Saturday afternoon, thousands of retail DHFL NCD-holders found that their ~ 9% secured NCDs were replaced by unsecured bonds of 20-year tenure (1% coupon and maturity in 2041). Panic-stricken NCD-holders have been reaching out to Moneylife and tagging us on social media for answers.
These unsecured bonds were also debited, subsequently, late on Monday night. Meanwhile, there has been absolutely no communication from the debenture trustees, the resolution professional or the acquiring company, Piramal Capital, about these debits and credits. At the same time, the ongoing courtroom drama over the last-ditch bid by the Wadhawan family (more on that later) is adding to investors’ anxiety.
The newly credited unsecured bonds were again debited on Monday night as seen below.
“Every company has to give an upfront notice of planned corporate actions before executing these. No such notice was sent to debenture holders of the redemption being done. Furthermore, it seems replacing a secured NCD with an unsecured NCD (which can be easily written off like was done by Yes Bank and LVB Bank by the RBI administrators) unless approved by the debenture holders is fraudulent,” said one investor, writing to Moneylife.
“Replacing a secured debenture with a (temporary) unsecured debenture constitutes a material event for which the trustees should have conducted a debenture holder meeting to explain the proposal and seek an approval,” he says, questioning the legality of the move and why a simpler, more straight-forward route for redemption/ repayment process was not considered.
Moneylife attempted to reach out to the debenture trustee—Catalyst Trusteeship—but we have received no response to our emails. Calls to the office were not answered.
While the Piramal group is going ahead, there is always the worry that a court decision could delay or derail the resolution process and investors may be left with unsecured 20 year debentures.
Moneylife’s attempt to contact the Piramal’s spokesperson elicited a rude and arrogant response. We were then connected to two other persons who are still to answer our queries. This article will be updated if we hear from them.
If you are a DHFL NCD-holder, here is what you can expect:
Debenture-holders, as a 'class of creditors', have voted in favour of this resolution plan. Hence, all debentureholders are considered as ‘assenting creditors’ irrespective of whether an individual debenture holder has voted or not or even voted against this plan. As such, all debenture holders will be paid as secured assenting creditors.
To those asking how much money will I get back?
Specific amount, which will be received by individual debenture-holder will be as per the approved distribution mechanism. Debenture-holders are requested to go through the para-V(b) of approved distribution mechanism as below for ready reference:
How much money you will receive, depends on the amount invested and is linked to principal outstanding in the category under which the investor is classified in terms of the above-mentioned chart.
When will I get my money back?
While it was originally estimated that distribution should be by October 2021, it is now expected that the money will be repaid in the next one or two days (before 30th September), since the bonds have been debited from the demat accounts of holders already. Record date for the NCDs is 13 August 2021.
With effect from 30 July 2021, trading on the stock exchange has already been suspended for these NCDs. This has been disclosed by DHFL as per LODR to stock exchange
on 19th July.
With respect to investments up to Rs10 lakhs, the entire recovery entitlement would be paid in cash and would be by way of credit to the account of the first holder.
With respect to investments above Rs10 lakhs, the investor will receive part cash (credit to first holder's account) and partly by way of debentures issued by Piramal (Piramal NCDs) in demat form in the names of the holders as on date of distribution. According to the approved resolution plan, the Piramal NCDs would be for a period of 10 years and would have a coupon rate of 6.75%.
In July, as per the directions of the National Company Law Tribunal (NCLT) in the order approving the resolution plan, the committee of creditors (CoC) reconsidered the allocation of higher amount to the suggested category of creditors. However, earlier approved distribution pattern remains unchanged as the suggested revision in distribution pattern did not get approval of CoC.
According to the current resolution plan, DHFL fixed deposit (FD) investors will get about Rs1,241 crore, against their admitted claims of about Rs5,400 crore.
DHFL and the debenture trustees have reportedly sent messages to fixed deposit- and NCD-holders, asking them to update their bank account and contact details. But many of the FD investors and NCD-holders have shared concerns about the transfer of funds, pointing out that their petitions challenging the payout of funds are still pending in court.
More Court Room Drama:
Meanwhile, on 29th September, the National Company Law Appellate Tribunal (NCLAT) is scheduled to hear pleas by fixed deposit and NCD-holders of DHFL and it's former promoter Kapil Wadhawan against the approval of Piramal Capital and Housing's resolution plan for the bankrupt housing financier.
Last week, DHFL had approached the Bombay High Court to challenge the special CBI court order of 20th August, which had given partial relief by discharging the interim monitoring committee but had rejected DHFL’s prayer to discharge it from the case. DHFL has, so far, argued that, since it had been taken over by Piramal Capital & Housing Finance Ltd, it should be absolved from all earlier liabilities.
DHFL has argued in its petition that “Section 32 (A) of IBC - which came into effect on 28 December 2019 - lays down a mandatory direction for a Corporate Debtor (DHFL) to be absolved from all the liabilities from all criminal offences committed before the commencement of CIRP.”
On Monday, Kapil Wadhawan, the erstwhile promoter of DHFL, moved the Bombay High Court through his lawyers to oppose DHFL’s plea to discharge the company's name and drop proceedings against it in an ongoing investigation by the Central Bureau of Investigation (CBI).
Mr Wadhawan’s lawyers contended that the resolution plan had timelines and included payments and that process is not over yet. Hence, in the event DHFL is discharged from the case, it will adversely impact the prosecution's case.
In July, NCLT had permitted Piramal Capital and Housing Finance to take over DHFL after the group was declared the preferred bidder, securing 94% of creditor votes. Piramal's total bid, at Rs37,400 crore, amounts to about 43% recovery on admitted claims. This recovery is further divided into 20% cash and 23% through NCDs.
Meanwhile, the Bombay High Court on Tuesday dismissed a bail plea filed by Yes Bank founder Rana Kapoor's wife Bindu, and their daughters Roshini Kapoor and Radha Kapoor-Khanna, and former bank senior executive Rajiv Anand, in the financial irregularities pertaining to DHFL.