The Securities and Exchange Board of India (Sebi) has asked lenders to Dewan Housing Finance Corp. Ltd (DHLF) for details on the credit rating claims raised by Oaktree Capital in its bid for the bankrupt mortgage lender, two people aware of the matter said. The private equity firm recently wrote to DHFL’s committee of creditors that, according to views from some credit rating agencies, non-convertible debentures worth ?21,000 crore that DHFL will issue under its ownership will have better credit ratings than those proposed by rival Piramal group. The stock market regulator has asked the DHFL administrator for names of the credit rating agencies cited by Oaktree, as offering any such views or ratings grade or outlook on future plans or instruments would be a violation of its regulations on credit rating agencies, according to the people mentioned above, who spoke on condition of anonymity. Sebi also asked the lenders about the stance taken by lenders in this respect. The regulator was alerted by an anonymous complainant, the people mentioned above said.In its letter to the committee of creditors (CoC) on 22 and 24 December, Oaktree had said its non-convertible debentures (NCDs) have favourable characteristics, mentioning that “based on feedback from multiple rating agencies, we believe DHFL post-Oaktree’s implementation plan would receive a AAA rating given its 100% retail focus and superior asset liability management (ALM) profile versus peers. NCDs are backed by DHFL loan assets only and not co-mingled with other assets that have not been diligenced, in a clean DHFL-only entity with no other lenders." Mint has reviewed a copy of this letter.
“As against this, an entity (Piramal Capital and DHFL merged), which has comingled wholesale and retail assets, would have a rating of AA or lower," the Oaktree letter said. An Oaktree spokesperson chose not to comment. Meanwhile, financial group Enam has informed Oaktree that it is no longer interested in being a part of the transaction as an Alternate Investment Fund (AIF) proposed by Oaktree. Oaktree has proposed that it would transfer DHFL’s stake in a life insurance business into the ownership of an Indian-owned and controlled AIF. Oaktree had proposed to infuse ?1,000 crore into an AIF, which would hold DHFL’s stake in DHFL Pramerica Life Insurance. Enam was among the AIFs shortlisted for this crucial part of the proposal. With Enam’s exit, the possible violation of credit rating regulations, Oaktree’s relatively lower score than Piramal, and the Insurance Regulatory and Development Authority of India’s plans to put the AIF through a strict “fit and proper test", the overall proposal by Oaktree to take over DHFL may run into trouble. On 27 December, Oaktree wrote to both the CoC and the Reserve Bank of India that for the NCDs proposed to be issued to financial creditors, “Oaktree expects to get a “AAA" credit rating" and Piramal Group has indicated a best possible credit rating of “AA".
Mint, 11th January 2021
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