SC Lowy looks to pull out from DHFL bidding process

MUMBAI: Efforts to win over infuriated bidders of troubled mortgage lender Dewan Housing Finance Corp (DHFL) by calling for fresh bids under revised terms have not helped calm nerves, as global investors are threatening to walk out of the process citing lack of transparency and nepotism, multiple people aware of the discussions said.

On Wednesday, Hong Kong-based SC Lowy informed the committee of creditors and the RBI-appointed administrator of DHFL that it would not pursue the transaction and sought a refund of the ₹100 crore “earnest deposit money” or bid bond guarantee it had submitted earlier.

ET has reviewed the contents of the letter sent to the home financier.

Another bidder Oaktree Capital has also communicated that they are unsure of participating in any re-bid and are evaluating their options, added the people mentioned above.

“In the event of the administrator or the CoC choosing to allow another round of submission of resolution plans, contrary to the contents of the communication dated November 13, 2020, wherein clear instructions were provided for the potential resolution applicants to submit their last and final resolution plans by November 17, 2020, we reserve our right to withdraw our resolution plan with immediate effect and require that the CoC and the administrator immediately return our earnest money deposit, no later than two business days from our intimation of withdrawal from the resolution process.”

SC Lowy had offered ₹2,300 crore for DHFL’s wholesale loan book.

The Ajay Piramal group is also extremely upset with the developments and could join the foreign bidders in pulling out. Some of the bidders are also threatening legal action if the lenders call for a new round.

Observers feel a pullout by both global investors will be embarrassing for the legitimacy of the entire bankruptcy exercise.

Position of Lenders

It will also weaken the position of the lenders who have been striving for the best value for DHFL through an insolvency resolution process.

With a debt of ₹88,000 crore, DHFL is going through the bankruptcy process since last year after defaulting on loan, bond repayments to banks, fixed deposit holders and PF companies.

The RBI-appointed administrator from DHFL is expected to communicate to all existing bidders explaining the reasons for seeking a fourth round of improved bids, sources said.

SC Lowy, Oaktree and DHFL did not reply to ET’s query.

The decision to call for a fourth round of bids has been put to vote on Monday. The result is expected soon. ET in its edition dated November 25 had reported that global investors were not happy with revised timelines and the change of rules during an ongoing bidding exercise.

Both Oaktree and SC Lowy along with the Ajay Piramal group have been opposing the unsolicited revised offer from Adani Properties for the whole of DHFL submitted a week after the deadline of November 9. The trio had on November 18 told the CoC that they would walk out if Adani’s bid was accepted, forcing the lenders on the backfoot. Some of the lenders were initially inclined to accept the revised Adani offer that had trumped the nearest Oaktree one by ₹250 crore. The Adani offer had the highest recovery along with maximum upfront cash payout.

SC Lowy is a privately held banking and finance group that specialises in fixed income investments and stressed assets and has been scouting for distressed opportunities in India for the last few years. From Jindal Steel and Power Ltd to Yes Bank, SC Lowy has upped its ante over recent months.

The NYSE-listed Oaktree Capital was founded by Howard Marks and is currently majority owned by Brookfield but runs independently.

“A walkout as a mark of protest will be very bad optically when India is trying to champion its bankruptcy process that is still in its infancy,” said a London-based stressed debt investor. “These are big global investors and have been bullish on the Indian story.”

Observers feel the twists and turns surrounding DHFL’s resolution is turning out to be similar to the previously circuitous exercises for Binani Cement and Essar Steel. “Both arguments in favour of Adani and against them are correct. The case is turning murkier day by day amid threats of legal actions, which in turn will only prolong the matter,” said a senior executive involved in the whole exercise.

Two years ago, the National Company Law Appellate Tribunal had ruled that the insolvency resolution process should aim to extract the maximum value from auctions of stressed assets as it approved UltraTech Cement’s revised bid of ₹7,900 crore to acquire debt-laden Binani Cement.

Binani Cement’s committee of creditors considered an improved bid from UltraTech after Dalmia Cement’s ₹6,930 crore bid was declared the highest bidder. Rajputana Properties, owned by Dalmia Bharat, filed a case against the decision. UltraTech Cement finally bagged Binani Cement after a favourable court ruling.

In case of Essar Steel, it took 583 days to complete its insolvency resolution process.