Lenders to Anil Ambani's debt-laden Reliance Home Finance (RHFL) face the likelihood of up to 80 per cent haircuts on their advances, with the top two bidders offering a maximum of 23 per cent on Rs 11,200 crore of outstanding debt.
Financial creditors to RHFL are effectively choosing between Hong Kong-based distressed asset specialist Ares SSG together with its arm Acre ARC and locally listed non-banking finance company (NBFC) Authum Investment and Infrastructure. Both have expressed the willingness to purchase some of RHFL's wholesale loans along with the main mortgage portfolio, people familiar with the process told ET.
Electronic voting on both the plans was opened on May 31 and will end on June 15, according to the current plan. It could be extended up to June 20 in case creditors need more time for internal approvals, a person familiar said.
Yes Bank with 13 per cent of the debt and lead lender Bank of Baroda (BoB) with close to 11 per cent are the top two creditors. State Bank of India (SBI) is third on that list, holding just less than 10 per cent of the debt.
Plans by both bidders accessed by ET showed that while Acre is offering more cash up front, Authum's offer on a net present value (NPV) basis is higher as it has promised to make its deferred payments within one year through non-convertible debentures (NCDs) issued at 8 per cent.
"Authum looks slightly ahead at the moment, though one cannot say since banks are still firming up their decision and there could be more twists in the tale," said a person aware of the negotiations.
The offers on the table are about half of the 40 per cent recovery expected by creditors at the start of the process. All bidders have assumed Rs 863 crore cash on the RHFL's books at the end of June 2020.
The two offers made by Authum include a cash upfront of Rs 1,345 crore with deferred payment of Rs 679 crore through NCDs. Authum is also willing to raise its cash upfront to Rs 1724 crore provided banks are willing to defer up to Rs 300 crore through 8 per cent NCDs or security receipts. Creditors have assigned a recovery value of 22.99 per cent on a NPV basis, higher than the 22.65 per cent they have assigned to Acre's best offer which includes Rs 1714 crore of cash up front and another Rs 23 crore through security receipts, which are typically redeemed only after recovery of loans.
"Commercially speaking, Authum is ahead. Both have offered more cash up front and squeezed the deferred payment timelines in case banks do not want to wait for cash in the future," said a second person aware of the negotiations.
Alpana Dangi-promoted Authum is a non-bank focused on capital markets based in Mumbai. Bankers said it plans to expand its business through this portfolio acquisition.
Its shares ended at Rs 510 a piece up 2 per cent on the BSE on Thursday.
Lenders took time to start the voting process after binding bids were submitted on March 6 because they wanted to finalize the payouts for secured and unsecured creditors and also for retail investors like NCD holders. Some lenders like Yes Bank have a substantial amount of exposure through bonds issued by RHFL and wanted a higher payout for their unsecured exposures.
Banks have now agreed on a 75 per cent payout on secured debt.
Lenders led by BoB also tried to convince Shapoorji Pallonji Group (SPG) to vacate their objection in the disposal of assets of RHFL in a case involving the inter corporate deposits (ICDs) invested by SPG subsidiary Always Remember Properties Pvt Ltd in June 2019 into RHFL, which defaulted in its payment obligations. The case is still in Delhi High Court.
People familiar with the process said two other bidders - Asset Reconstruction Company (India) Ltd (Arcil), in association with its largest shareholder Avenue Capital, and Capri Global - are not in the race as they offered a relatively low value and bid only for the company's retail assets.
The loan book also involves substantial inter corporate loans that are estimated to be two times the advances to builders and home buyers. The company has defaulted on debt of close to Rs 6207 crore and the asset cover had fallen below 100 per cent on outstanding debentures of Rs 5974 crore, RHFL said as part of its March results.
Bidders had to give a Rs 10 crore guarantee to qualify for the process. BoB Capital Markets, the investment banking arm of BoB, and consultancy firm EY are helping lenders with the process. RHFL is among the biggest in Anil Ambani's financial services portfolio, which includes commercial finance and insurance businesses.