InvestorQ : Why did the creditors of Dewan Housing finally vote in favour of Piramal Enterprises over Oaktree? Do you see Oaktree taking it up legally?
ishika Banerjee made post

Why did the creditors of Dewan Housing finally vote in favour of Piramal Enterprises over Oaktree? Do you see Oaktree taking it up legally?

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4 months ago
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The Committee of Creditors or COC of Dewan Housing Finance Corporation voted strongly in favour of the resolution plan submitted by Piramal Enterprises. This should pave the way for Piramal to take control of DHFL and turn the company around. The bidding had been through an intense last round bidding between Piramal Enterprises and Oaktree Capital.

In the COC voting, the offer given by Piramal Enterprises got 94% votes while the proposal put forth by Oaktree Capital of the US only got 45% of the votes. The votes for Adani Enterprises were just about 15% from the Committee of Creditors but it is already quite clear that Adani Enterprises was not in the race for DHFL any longer.

While the final reasoning has not been provided, one explanation has been that the COC found the Oaktree offer too complicated and hard to assess and compare. Also, there were too many loopholes in the Oaktree plan and there was a lot of ambiguity about the ratings of future bonds to be issued to the lenders. This worked in favour of the Piramal offer.

Piramal has proposed to merge its financial services business with Dewan Housing Finance and will also retain all its employees. The winning bid required 66% votes from the COC and that was easily achieved. Promoters of the Dewan Housing are currently in jail and are facing money-laundering charges for round tripping funds out of India.

There were two aspects that worked in favour of Piramal. Firstly, Piramal has offered recovery of Rs.37,250 crore over next five years for DHFL lenders. But what really attracted the COC was that Piramal will pay Rs.12,700 crore upfront cash to lenders. Shareholders of Dewan Housing will anyways get zero value.

Even the insurance business of DHFL will fit better into Piramal as it could be a regulatory challenge trying to embed the insurance business into a foreign entity like Oaktree. The lenders are waiting for Oaktreeā€™s move since they had warned of legal action if the bid went against them. However, it is not clear if such a move would work against a vote.

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