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DHFL says downgrades by rating agencies unwarranted, questions rationale

DHFL says downgrades by rating agencies unwarranted, questions rationale

DHFL says downgrades by rating agencies unwarranted, questions rationale
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By Nisha Poddar  Jun 6, 2019 9:39:48 AM IST (Updated)

DHFL said the actions were surprising and unwarranted as it has been making substantial efforts to avoid defaults on any bonds, repayment of its financial obligations. 

Dewan Housing Finance Corporation Ltd has questioned a recent move by rating agencies Icra and Crisil to downgrade the rating of the non-banking financial company's commercial paper (CP). DHFL said the actions were surprising and unwarranted as it has been making substantial efforts to avoid defaults on any bonds, repayment of its financial obligations.

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Crisil and ICRA have downgraded on June 5 the rating of DHFL's Rs 850 crore commercial paper to “D” from "A4+" and "A4", respectively. A press release by Crisil stated that "the downgrading reflects delays in debt servicing by DHFL on some of its non-convertible debentures (NCDs) - not rated by CRISIL - because of inadequate liquidity."
“We are committed and ensuring that even going forward we will continue to honour all our obligations. These actions are unwarranted and the Company is seeking clarification on the rationale that predicts DHFL’s inability to service pay-outs on the due dates. Such a speculative rating rationale is not adequate,” the company said in a news release.
DHFL has already paid Rs 200 crore out of the delayed interest payments on non-convertible debentures (NCDs) worth Rs 1,150 crores, sources told CNBC-TV18. The company plans to pay the rest of the amount by next week before the end of the cure period of 7 working days by the proceeds from its stake sale in Aadhar Housing Finance to Blackstone.
The crisis-hit mortgage lender is staring at a Rs 750 crore CP liability in June. Many rating agencies have questioned the company’s ability to meet these obligations.
Sources told CNBC-TV18 that DHFL has already arranged for meeting Rs 100 crore CP liability on June 7 and the rest of the Rs 650 crore CP maturity lined up for the remaining month is likely to be paid by internal accruals.
The company estimates close to Rs 2,000 crore from its cash collections mid-June.
The total requirement of outflows for DHFL in June stands at Rs 5,500 crores and inflows, including funds from Blackstone, is at Rs 4,000 crore. DHFL is looking to bridge the Rs 1,500 crore shortfall by selling portfolios to banks and is in a crucial meeting with State Bank of India-led lenders’ consortium to solve for liquidity issue, according to sources.
Another source of fund for DHFL is likely from the stake sale of Avanse Financial to Warburg Pincus. RBI has approved the deal and funds could come in by next month. DHFL, promoter group is likely to raise around Rs 800 crore from the sale of shares in Avanse.
Moreover, DHFL is in talks with Aion Capital, Lone Star and Cerberus to sell a majority stake in the company in order to resolve its liquidity issues. The deal is likely to be completed in three months.
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