Dewan Housing Finance Corporation’s (DHFL) non-convertible debenture (NCD) holders want their money back on the recovery of dues, along with other creditors. 63 Moons Technologies, one of the major NCD holders with Rs 200 crore exposure to DHFL, has already filed a petition with the NCLT and has appealed to other NCD holders to file separate petitions.
It is not clear whether other NCD investors too have filed separate petitions. But, there is a possibility that more NCD holders will likely move NCLT with similar petitions, according to multiple people familiar with the development. Moneycontrol couldn’t independently contact other NCD investors of DHFL.
NCD holders basically demand that they should get priority when the financial recovery happens in DHFL. This petition, however, is unlikely to have any significant impact on the bidding process itself.
This development comes at a time when DHFL bidding has entered the final stage. The committee of creditors (CoC) is likely to conclude voting by January 14 and decide the winner by end of this month. Piramal Group and Oaktree are the competitors in the last round.
In its petition, 63 Moons has said that the benefit of avoidance applications for approximately Rs. 30,000 crore filed by DHFL administrator under section 66 of Insolvency and Bankruptcy Code (IBC) should come to CoC, including NCD holders, who are the actual sufferers of the default. “Presently, as per the resolution plans submitted by Resolution Applicants, the benefit or the recovery amount arising from the avoidance applications will go to Resolution Applicant. This same resolution plan has been put up for voting,” 63 Moons said.
DHFL owes its creditors around Rs 85,000-Rs 90,000 crore, of which Rs 45000 crore is to NCD and FD holders and about Rs 35,000 crore to banks. “All NCD, FD holders and other creditors, who want to join NCLT and other proceedings, including EOW-Chennai and other agencies for recovery of money should submit their details voluntarily to the respective forum,” 63 Moons said in a recent statement.
63 Moons, earlier known as Financial Technologies (India), is a company floated by businessman Jignesh Shah.
63 Moons, in its petition, has argued that the current resolution plan is in violation of the Insolvency and Bankruptcy Code. Its petition says that the fraudulent transaction recovery benefit, which is a siphoned off money of approximately Rs. 30,000 crores filed by DHFL administrator under Section 66 of Insolvency and Bankruptcy Code (IBC), should come to creditors, that is banks, NCD and FD holders, and not to the buyer (resolution applicant) in IBC.
“Strangely, the current DHFL resolution plans say that this recovery will go to the buyer, who would be paying a mere Rs 35,000 crore as against the debt of Rs 85,000 crore (so straight Rs 50,000 crore write-off/loss to creditors). If NCLT rules in favour of the creditors, then the creditors can get minimum of Rs 65,000 crore (Rs 35,000 crore + Rs 30,000 crore from the additional benefit realised from fraudulent transaction recovery),” 63 Moons said.
63 Moons argued that other members of the creditors, which comprise mainly banks, have recourse to personal guarantees of promoters whereas NCD holders do not have any such contractual recourse. “NCD holders will be left high and dry with a massive 65% to 75% haircut (Rs 50,000 to 60,000 crore) if future recoveries from fraudulent transactions are allowed to pass to the buyers (resolution applicants), instead of the creditors,” they said.
Banks are showing all signs of accepting 37-40 percent value as they can later exercise personal guarantee given by the promoter, whereas NCD and FD holders do not get anything from that and will have to forgo 60% of their principle amount which is contrary to law, 63 Moons said in a statement. “So, we want NCLT to rule that the recovery of siphoned-off money should go to creditors, which includes the banks as we all are the real sufferers and not the new buyers of the company,” it said.
Further, the investor has argued that the recoveries from the promoters are not uncertain. The Wadhawans have made it clear in public domain that they are in possession of assets worth more than Rs. 40,000 crores, it said. “Hence, the recovery of money from the Wadhawans are realistically possible and foreseeable. However, the buyers (resolution applicants) seek to carve a colossal advantage for themselves and rendering the NCD and FD holders to fend for crumbs,” said the company.
Wadhahwan, the former promoter of DHFL, has been writing letters to DHFL administrator and other authorities seeking another chance to pay up all dues and take control of the company under the terms set out by the creditors. Wadhawan has offered to pay up the dues in 7-8 years. The tainted promoter of DHFL, also facing investigations on alleged irregularities, also wants to participate in the CoC meetings and get access to DHFL’s books. But, none of his pleas have been heard so far.
The hearing by 63 Moons will next come up for hearing on January 13.