Around Rs 32,000 crore of loans may be transferred: DHFL lenders plan to put loans to builders in SPVs

MUMBAI: Lenders to Dewan Housing Finance Corporation Ltd (DHFL) are considering hiving off a chunk of the mortgage firm’s loans outstanding from builders and transferring that to companies created specifically to hold the debt.These special purpose vehicles (SPVs) could also work like pooled entities, such as alternative investment funds (AIFs), said multiple people aware of the discussions over a debt resolution plan for DHFL.Under such an arrangement, DHFL’s lenders will transfer as much as Rs 30,000-32,000 crore of its Rs 42,000 crore wholesale loans outstanding to the SPVs. If they go ahead with this plan, DHFL will become a predominantly retail-focussed shadow bank with a much lighter balance sheet, making it easier for its lenders to rope in a strategic partner.They are currently evaluating the ownership structure of the SPVs, which may even house a project each, and the process by which they will enforce the conditions on the loans given by DHFL, the people said.Development managers are expected to be appointed for each project to complete the work. DHFL’s lenders will get paid from the cash flows of the SPVs, after servicing fees to the development managers and servicing of any additional debt infused in the projects for their completion.The new development managers will infuse fresh funds either through equity or fresh working capital loans, kickstart the stuck real estate projects and generate cash flows through the sale of the inventory to pay back the loans, the people said.Cash Flow BeneficiariesDHFL and SBI didn’t respond to emails until press time Thursday. AIF is a trust like structure where the collection of the debt extended by DHFL to the wholesale book will happen and the lenders will be serviced out of that, the people aware of the discussions said. The SPV or the AIF is expected to be the beneficiary of all future cash flows — the repayment of loans given to the projects. They will distribute the proceeds to the unit holders or the banks. The idea is to create a legally tenable structure that gives the lenders a direct access to the underlying real estate assets and its cash flows.The lenders have been in discussions with business groups with interests in real estate, such as the Adani, Tata, Piramal groups, to come on board as the development managers of the projects and complete those in lieu of a development management fee. The Adani Group is expected to pick up several of the projects, the people said.Emails to the Adani and Tata groups did not generate a response. The Piramal Group called the news speculation, and declined to comment further.Although the lenders are pushing for one manager for each project, there could also be multiple managers roped in, each managing a cluster. According to the people ET spoke to, to facilitate the new asset managers to complete the projects and help servicing the debt obligations, the security or the collateral (land, FSI approvals, etc.) for the underlying assets against which loans are outstanding will be enforced. This will also help ringfence the development manager from any future legal challenges.This step is likely to follow an immediate intervention whereby lenders are looking to take a 51% stake in the company by converting a part of the debt into equity at par and facilitating a change of management.DHFL’s board is scheduled to meet on Friday, where it would consider a proposal for issuance of equity shares and other securities, including by way of preferential issue, against debt as part of a resolution plan.The company had borrowed from banks, mutual funds, insurers and retail depositors to bankroll realty projects which subsequently got stuck. An official said an AIFlike structure would suit the lenders and project managers. “AIF is a trustee structure. The assets move but not the liabilities. They are payable when able. In any other structure like an NBFC, the debt liabilities will also move and the new manger will have to honour these obligations,” said the official. “An AIF manager is not borrowing; he is managing as a trustee. Unit holders will economically benefit.”

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