BS: DHFL resolution plan: Stakeholders seek legal protection from future claims

13 August 2019: Key stakeholders in the beleaguered Dewan Housing Finance Corporation (DHFL), including the consortium of bankers, unsecured creditors and potential PE investors, are discussing the possibility of a legal framework which would indemnify them from any future claims made against the company.

The stakeholders want protection from any litigation which might arise due to fresh claims against the company, especially after PE funds have bought stake in the company and the resolution plan has been cleared by the bankers.

The matter has come to the fore since many mutual funds, which lent money to DHFL, are yet to recover their dues. DSP Mutual Fund has initiated legal action against DHFL for recovery of around Rs 180 crore. Mutual funds are not formally bound by the inter-creditor agreement, which has to be mandatorily signed by banks to mark their consent to work on a resolution plan as per Reserve Bank rules. So claims can arise even after a resolution plan.  

According to sources privy to the discussions, the prospective investors of DHFL have made it clear that in the absence of such legal protection, they would prefer to bid for the company through a National Company Law Tribunal (NCLT) process. They said that since such a process would have the legal sanction of the NCLT, it would be free from any future legal claims against the firm.

A source involved in the discussions says: “Such a legal structure will provide comfort to potential buyers besides helping the lenders attract a wider participation from strategics who may have kept away — apart from PE investors AION Capital or Cerberus which have shown interest.”

A spokesperson for DHFL did not respond to a query on the issue and an email to AION Capital did not elicit any response.

DHFL has sent a resolution plan to the consortium of bankers. Its broad feature is a request for extending credit lines to the company to the tune of around Rs 1,500 crore every month so that it can kick-start fresh lending. It also envisages a moratorium on repayments and that there should principally be no haircuts to any creditors. The plan is under scrutiny by the consortium of banks. As a result, DHFL is unlikely to be able to pay its interest obligation of Rs 440 crore in the next two months to secured lenders (those holding NCDs) against a principal outstanding of Rs 4,770 crore.

Those involved in the discussions say that an earlier move to carve out DHFL’s retail loan portfolio into a separate company and sell it to an investor was abandoned as lenders were not keen on such a deal. As a result, PE funds like AION are now willing to pick up a stake in DHFL and are also looking for control. The company’s promoter, Kapil Wadhawan, had hinted earlier that he would be willing to give joint or even a controlling stake in order to get funds for the company.

The Business Standard reported

ET: Leelaventure announces new dates for shareholder voting on Brookfield deal

13 August 2019: While declaring its results for the quarter ended June, Hotel Leelaventure said it was seeking fresh approval of the shareholders by postal ballot for its sale of assets to Brookfield. Leelaventure said voting will begin on August 18 and will end on September 16. The company said it will declare the results of the postal ballot September 18.

Last month, Sebi had asked Hotel Leelaventure to put to vote afresh the asset sale transaction of the company before the shareholders besides providing additional disclosures in its postal ballot notice for asset sales to Brookfield like details of valuation of both the asset sale transaction and additional intellectual property transaction including the methods adopted by the company.

Tobacco-to-hotels conglomerate ITC had challenged the transaction in the dedicated bankruptcy court, National Company Law Tribunal (NCLT) in April, claiming mismanagement and oppression of minority shareholders and had also complained to Sebi.

In March this year, Leela Venture announced that Canadian alternative asset management company Brookfield had agreed to purchase its key hotel properties in Delhi, Bengaluru, Udaipur and Chennai for Rs 3,950 crore.

The company reported a loss of Rs 7.52 crore for the quarter under review, compared to a loss of Rs 66.69 crore in the corresponding period of the previous fiscal.

Leelaventure reported a total income of Rs 329.4 crore down from Rs 359.5 crore in quarter ended June 30, 2018.

Referring to the proposed asset sale to Brookfield, the company’s auditors said if the interest and other finance costs notified by the asset reconstruction companies were provided in the books of accounts, the loss for the quarter would have been higher by Rs 234 crore. The auditors also said relating to enhancement in rentals, unilateral termination of lease of the Mumbai hotel and initiated eviction proceedings which the company is legally contesting, the disputed amount not provided in the books for the quarter ended June 30 was Rs 3.52 crore. The notes further added that related to the demands made by Airports Authority of India relating to rent, minimum guarantee fee in respect of the lease of 11,000 square meters of land in Mumbai cumulatively amounting to Rs 807 crore upto January 31, 2019 is not provided as the liability is disputed and not crystalised as per the legal opinion.

The Economic Times reported

ET: Vedanta’s Anil Agarwal withdraws ‘exploratory’ expression of interest for Jet Airways

12 August 2019: Billionaire Anil Agarwal’s family trust, Volcan Investments, has withdrawn its expression of interest (EoI) for Jet Airways a day after the billionaire expressed his interest in the grounded airline.

“The EoI for Jet by Volcan was exploratory in nature. On further evaluation and considering other priorities, we intend to not pursue this further,” Agarwal said on Monday.

Volcan was one of three players to have shown interest in the debt-ridden airline that is staring at claims worth Rs 25,000 crore. The other two players to have shown interest were Panama-based investment firm Avantulo Group and Russian Fund Treasury RA Creator. The airline did not evince the interest of any strategic player including Etihad Airways that holds 24% in the company.

In an interaction with ET, Agarwal said that while he has stepped back, he wants to encourage other airlines and investors to come forward to bid for Jet. He said his initial interest was driven a lot by his fondness for the airline.

“Jet Airways was the pioneer to open skies in India after Air India, created a world-class airline with the finest team and connected numerous global and domestic destinations. India is among the largest and fastest-growing aviation markets in the world,” he said.

Agarwal said Volcan Investments remains invested in Vedanta, Sterlite Telecommunications and Sterlite Transmission, and will keep looking for investment opportunities. Vedanta will remain in the core, natural resources business.

Agarwal through Volcan has shown a penchant to take risks and the most recent investment was Volcan’s exit from Anglo American in which it had bought a 19% stake in 2017. A year later the family trust had sold part of this stake to Vedanta’s oil and gas arm Cairn India Holdings in a move that was widely criticised by investors of Vedanta. Last month, both Volcan and Cairn exited. “We had bought a stake in Anglo at $11 per share and we exited at $22,” Agarwal said.

The trust had invested close to 15% of the stake buy as part of a consortium which earned close to $4 billion of net gain through its exit.

“I came as an investor at the right time and exited at the right time and in the process, the company has done very well,” said Agarwal adding that during his sojourn as an investor in Anglo American, the mining company was rerated, dropped plans to exit South Africa and became more disciplined. Agarwal maintained that he continues to enjoy good relations with Anglo’s management.

Meanwhile, the two players remaining in the fray have time till September 12 to submit final bids. Naresh Goyal founded Jet Airways has been grounded for close to four months due to the inability to arrange for cash to remain afloat.

The Economic Times reported