Dewan Housing Finance Corporation (DHFL) on Tuesday said it would consider converting loans into equity. The NBFC’s board is set to meet on August 30 to discuss the proposal.
The resolution plan, awaiting a sign-off from a few categories of lenders, has reportedly pencilled in a new management team. Bankers, it is understood, want Kapil Wadhawan to step down as chairman and managing director of DHFL; moreover, they want him to reduce his stake to below 10 per cent. The promoter, bankers familiar with the plan said, would also be required to pledge a part of their remaining stake to lenders (which would be below 10 per cent). The promoter group holding in DHFL is 39.21 per cent.
Other terms of the resolution plan include the transfer of bad debt into a fresh entity or a conversion into a new instrument. This so-called ‘bad’ debt – Slum Rehabilitation Authority loans and developer loans could get converted to an equity, or semi-equity instrument like Cumulative Redeemable Preference Shares (CRPS). Thereafter, part of the good debt within DHFL could also further get converted to equity from debt.
An exchange notice by the company said, “We wish to inform that a meeting of the board of directors of the company is scheduled to be held on Friday, 30th August, 2019, inter-alia, to consider and approve the proposal for issuance of equity shares and/or other securities of the Company including by way of preferential issue, pursuant to a conversion of debt to equity under the proposed resolution plan, or any other permissible mode or a combination thereof through issue of prospectus and/or placement document and/or letter of offer and/or any other permissible/requisite offer document, and/or alteration of terms of existing securities of the company.” —FE