Oaktree hikes DHFL bid by Rs 1,700 crore, Piramal still in race

MUMBAI: US-based private equity fund manager Oaktree Capital has hiked its bid for DHFL by Rs 1,700 crore, resulting in a net present value of total recovery for lenders at Rs 36,410 crore. Sources close to the US firm said that the increase makes it the highest bidder. Second-highest bidder Piramal Group is also understood to have revised its offer by an identical amount.
Though it is not clear which bidder is ahead given the multiple revisions, it is becoming evident that lenders will get more than they originally envisaged. However, even with the expanded bids, the recovery would be less than 40% of the admitted claims worth Rs 87,082 crore.
Oaktree is understood to have submitted its revised bid in a meeting with DHFL’s committee of creditors. Under the revised proposal, Oaktree would make an upfront payment of Rs 17,100 crore, providing additional cash of Rs 300 crore to fixed deposit holders, and Rs 21,000 crore by way of secured debt instruments. This would result in a recovery of Rs 38,400 crore for the creditors.
Given that the debentures will have a seven-year tenure, the net present value would be Rs 36,410 crore, which Oaktree claimed would make it the highest bidder.
Oaktree also informed lenders that there are precedents for the structure it has proposed for dealing with DHFL’s stake in its insurance joint venture, DHFL Pramerica. The private equity firm said that if it were to be allowed to acquire the bankrupt housing finance company, DHFL’s debt equity ratio would fall to 1.1%, capital adequacy ratio would jump to 27% and just retail home loans will be retained in the books of the housing finance company.
Meanwhile, Piramal Group, which had bid Rs 37,250 crore earlier is understood to have hiked its offer during its meeting with DHFL’s lenders on December 18. According to banking sources, the lenders will look at value maximisation, which will be determined by the net present value of the bid and the extent of cash being provided upfront. The net present value will factor in the interest rates being offered by the bidders.

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