Lenders look to repay FD depositors

Lenders to distressed Dewan Housing Finance Ltd (DHFL) are taking a look at a reimbursement technique for 55,000 fastened deposit holders as a part of a decision plan.

According to the minutes of a gathering of the Committee of Creditors (CoC) held final week, the lenders are taking a look at varied eventualities to distribute the proceeds of the funds obtained from the brand new investor. This contains distribution beneath the waterfall mechanism or beneath pari-passu distribution mechanism or setting apart some quantity of the excellent claims for small buyers.

According to the waterfall mechanism beneath the Insolvency and Bankruptcy Code (IBC), secured collectors should be paid totally earlier than any funds could be made to unsecured monetary collectors, who in flip, have precedence over operational collectors. The pari passu distribution mechanism offers equal precedence to all collectors, and the proceeds are distributed in proportion to their debt.

Most lenders, nonetheless, favour a distribution plan the place the CoC units apart 5% of the declare quantity for small buyers (with funding as much as ₹10 lakh), unsecured monetary collectors and operational collectors, with the remaining decision quantity being distributed throughout secured collectors beneath the waterfall mechanism. The consensus of all CoC members will not be ultimate as lenders stay divided over how a lot quantity must be allotted to unsecured monetary collectors which represents a small portion of CoC voting share.

Catalyst Trusteeship Ltd (CTL), which represents retail bondholders of DHFL, mentioned that unsecured monetary collectors are unlikely to oppose the distribution mechanism as there’s some quantity put aside for them. “The legal counsel further discussed certain legal precedents with respect to distribution mechanism in other IBC cases and mentioned that Section 53 of the Code provides a base principle for the manner of distribution, but CoC in its commercial wisdom and discretion can provide for a different manner of distribution as long as the key legal principle of equity is not violated and other mandatory contents of Section 30 of the Code are complied with,” in accordance with the minutes of the assembly, a duplicate of which was reviewed by Mint.