According to industry sources, the legal route is the only option left for the fund houses as the norms laid down by the Securities and Exchange Board of India (Sebi) allow fund houses to participate in a debt resolution plan if the stressed asset is already side-pocketed.
Sources add that banks are keen that MFs also join the inter-creditor agreement (ICA) framework for debt resolution of DHFL, but MF officials say they can’t join the resolution plan without an exemption from Sebi. The same-day rule laid down by Sebi requires fund houses to take a call on side-pocketing the stressed asset on the same day of the credit event.
Since most fund houses were still in the process of meeting the criteria required for creating a side-pocket at the time of DHFL’s downgrade to below-investment grade (credit event) on June 5, it prevented them from participating in the ICA framework introduced by the Reserve Bank of India.
In its last hearing, the court allowed Edelweiss MF’s plea seeking disclosure of assets and liabilities of DHFL.
The court also extended the injunction on DHFL
from making repayments to either secured or unsecured lenders, until further orders. The court gave four weeks’ time to DHFL to file its reply.
On Thursday, DHFL said that in light of the interim order granted by the HC, the company has been unable to remit the funds collected to the assignee/buyer of the securitised/assigned pool, resulting in non-payment on the due date. The company was responding to a rating action by ICRA, which downgraded three home loan-backed pools of DHFL to default status.
ICRA said the ongoing legal proceedings against DHFL might impact its ability to transfer the pool collections into the respective collection and payout accounts of the rated transactions in a timely manner.
DHFL has seen a flurry of legal suits, filed by MFs
Banks are seeking debt resolution plans under RBI framework
With Sebi norms preventing ICA entry, MFs take legal route
Earlier, Nippon India MF and Edelweiss MF had moved court