Dewan Housing Finance Corp., an Indian mortgage lender that has delayed payment on some of its obligations, plans to ask banks to lend Rs 15 billion ($217 million) every month to help revive the company, a person with knowledge of the proposal said.
The financier, which has about Rs 800 billion of obligations, will submit the resolution plan on July 10 to a consortium of seven lenders led by state-run Union Bank of India, the person said, asking not to be identified as the discussions are private. The other proposals include increasing the tenor of some loans and converting part of its debt into equity, according to the person.
Investor confidence was shaken after financier Infrastructure Leasing & Financial Services (IL&FS) Ltd. defaulted for the first time in June 2018, shutting the door for bank loans for many shadow lenders. Dewan Housing was among the worst hit in the wake of the IL&FS shock, which also pushed up financing costs and made it harder for non-bank financing companies to access the bond market. Dewan Housing’s credit rating was slashed to D from AAA this year as it delayed repayments.
Under the proposal, Dewan Housing will offer banks new loan pools as security for the funds, the person said. That in turn will help lenders meet their mandatory targets to lend to farmers and small businesses. Dewan Housing is proposing banks fund the company for the next six months, the person said.
Dewan Housing has so far securitized about Rs 250 billion from its Rs 1.2 trillion of loan book, the person said. The details of the proposal are subject to change and it’s unclear if the lenders will approve the plan, the person said. A spokeswoman for Dewan Housing declined to comment.
While lenders mull the resolution plan, Dewan Housing will continue looking for an investor for a stake in the company. Founders hold about 39.6 per cent in the company, and plan to sell half of their shares, the person said. The company has been selling assets including a mutual fund, low-cost housing-finance unit, and an education-loan company. Dewan Housing shares have lost about 87 per cent of their value over the past year.
If the resolution plan is accepted by the lenders, Dewan Housing will seek approval from institutional investors to either extend the maturity of its bonds or change the coupon rate, the person said. The company expects to repay individual investors without changing bond terms.
The financier expects to earn enough interest on its assets to meet debt repayments due this quarter, which total about Rs 70 billion, the person said. It was behind schedule in servicing its financial obligation last month. It delayed payments on debt of Rs 11.85 billion.