Voting is set to take place next week and the lenders are closeted in hectic discussions with lawyers on the voting process, seeking to avoid last-minute hiccups. DHFL is the biggest financial services firm to go under the hammer after the insolvency and bankruptcy process was started in 2016, and the fight between New York-based Oaktree and Mumbai-based pharma entrepreneur and real estate and financial services baron Ajay Piramal has become a hotly contested one.
New details about the bids by both Piramal and Oaktree have given the former an edge, but the lenders will have the final say when voting begins on December 23.
Piramal has offered to pay fixed deposit holders extra 10% of their total outstanding which is over and above the offer they are giving to the committee of creditors (CoC).
‘Both Offers Complex, Very Close’
Oaktree, it has emerged, has stipulated a condition that ₹1,500 crore from its offer be transferred to an escrow account to pay for any insurance related claims and losses.
“Though Oaktree scores on an NPV (net present value) basis, the conditions on its plan have to be assessed closely. Lenders will prefer a plan with little conditions. The assessment is yet to be done but voting will take place only after both bids are discussed thread bare,” said a person familiar with the negotiations.
Creditors will first meet in a series of virtual meetings starting Friday to discuss all legal tangles of the bids.
Both Oaktree and Piramal have made bids very close to each other but key details and differences emerge in the fine print of the bids. “The offers on the table are both complex and very close. SBI Capital Markets will make its assessment and share with lenders on Friday. Two valuers will also share their opinion on both the bids and the companies will also give details of their bids. After we have all the information we have to make a fair evaluation based on the parameters set in a legally full proof manner for which opinion will be sought,” said a person involved in the negotiations.
Law firms Cyril Amarchand Mangaldas and J Sagar Associates are the lawyers for the CoC while AZB & Partners are lawyers for the RBI administrator. Real estate consultancy JLL and RBSA Advisors are helping in the valuation exercise.
Oaktree has offered ₹11,646 crore to the lenders and ₹21,000 crore of bonds payable over 7 years. The cash or equity offer includes about ₹10,400 crore of cash already in the business and Oaktree’s equity of ₹1,500 crore.
Piramal has offered ₹12,700 crore, which includes DHFL cash, and its own equity contribution of ₹2,500 crore. Piramal is also offering ₹19,550 crore of bonds payable over 10 years and extra payment to FD holders. Apart from all this, Piramal has offered to merge his financial services business with equity ₹10,400 crore with DHFL thereby strengthening its ability to issue new debt. Piramal’s capital adequacy ratio at 33% is currently one of the highest among NBFCs.
However, it is the DHFL Pramerica Life Insurance business, not part of resolution, which could swing the deal either way.