Oaktree Capital raises its offer for DHFL creditors

Oaktree Capital Management, a US-based stressed asset buyer, proposes to offer more money to Dewan Housing Finance Corp.’s financial creditors as the bidding war intensifies.

Oaktree Capital has proposed increasing its upfront payment for the besieged construction finance company by another Rs 1,700 crore, according to two people with first-hand knowledge of the development who did not want to be identified as details are not yet public. The investor also offered to pay another Rs 300 crore to the holders of fixed deposits, people said.

The Rs 1,700 crore will be paid from the additional interest income DHFL will accumulate from its existing loan portfolio until the resolution process is completed and Oaktree Capital is able to take over the real estate financing company.

This comes after the international investor has agreed to remove the terms from its December 14 offer. It is in contention with Piramal Enterprises Ltd. and the Adani Group for the troubled mortgage lender.

In its previous offer, Oaktree Capital claimed it would deposit Rs 1,500 crore into an escrow account and transfer the funds after paying the expenses associated with the sale of the DHFL group life insurance firm. After the lenders objected, the stressed asset investor agreed to add this amount to the initial payment to financial creditors.

The latest changes have increased Oaktree Capital’s total supply to over Rs 38,000 crore, the people quoted earlier said. This includes a prepayment and seven-year non-convertible bonds worth Rs 21,000 crore which will be issued by Oaktree Capital to financial creditors.

Piramal Enterprises, the other bidder who actively participated in the sale of DHFL, proposed to pay Rs 1,700 crore from the additional interest income, the aforementioned people said. The Ajay Piramal-owned bidder’s total bid for DHFL amounts to over Rs 37,000 crore. Includes Rs 19,550 crore of 10-year non-convertible bonds and Rs 150 crore to be paid to holders of fixed deposits.

Aside from the two, the Adani group is also in the running but has yet to review its repayment plan, citizens said.

Offers for DHFL saw more reviews from potential buyers after the Adani Group substantially changed its offering in November. It proposed to purchase DHFL’s entire loan portfolio, instead of the wholesale loans, as initially indicated. This has led to complaints from other bidders, most notably Piramal Group, which raised a formal protest in a letter to creditors on November 15.

To avoid any disputes, the financial lenders allowed all bidders to review their bids without placing any restrictions on the type of assets they were trying to bid on.

The offers will be put to the vote by the creditors’ committee after assigning the scores, according to the merit of the offer. In addition to the value of the prepayment, the scoring model will also take into account the nature of the securities issued to creditors, the net present value of the account, and what bidders intend to do with the company after purchasing it.

BloombergQuint awaits responses to questions sent Thursday to Reserve Bank of India-appointed administrator at DHFL, State Bank of India, Oaktree Capital and Piramal Group primary lender

The DHFL owes financial creditors more than Rs 87,000 crore, according to the real estate financing firm’s website. The insolvency proceedings launched in November 2019 have experienced significant delays due to the Covid-19 pandemic.