Legal action against DHFL to not disrupt resolution proceedings by banks: DSP Mutual Fund

The decision to initiate legal proceedings against troubled Dewan Housing Finance Corporation (DHFL) will not affect the ongoing resolution process initiated by banks, DSP Mutual Fund said.

“DSP Mutual Fund has not done anything to disturb the ICA process. The legal proceedings are related to the remainder of the dues which were communicated to be paid in the next couple of days. Hence, we reiterate that the legal proceedings are not initiated to disturb the ICA process.” DSP MF said in a statement to media.

The ICA (inter creditor agreement) is a pact signed among lenders that lays down procedures for the resolution process for distressed companies. Typically signed between banks, mutual funds are often

The statement comes after the fund house was reported to have taken legal action against DHFL to recover the dues from the beleaguered company.

DSP Mutual Fund had an exposure of Rs 150 crore to commercial papers issued by DHFL with scheduled maturity on June 25, 2019.

DHFL made a part payment of Rs 60 crore on June 25, 2019 (equivalent to 40 percent of outstanding exposure).

Subsequently, DHFL shared a press release on June 25, stating that the balance amount shall be paid in next couple of days.

DSP MF received further 10 percent of the total outstanding amount on June 29; implying 50 percent of dues remaining unpaid.

At the end of September 2018, DHFL had dues worth Rs 440 crore towards secured lenders (inclusive of NDCs), and outstanding principal of Rs 4,770 crore.

As of March-end 2019, the company had defaulted on bank loans of Rs 40,600 crore and debt securities of Rs 45,380.