Thursday, December 26, 2019

20,000 Reliance Home Finance bondholders to take first hit

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About 20,000 debenture holders in Reliance Home Finance (RHFL) — including individuals, mutual funds and retirement bodies — are set to take the first hit on their investments as the full repayments of about Rs 3,000 crore fall due on January 3, with little hope of recovery. The trustee of such junk bonds has warned the company of legal action if it fails to repay the same.

“The trustee will definitely seek legal recourse to recover the money unless the company repays the full money, recalled by it citing default grade,” said a senior executive who is a member in the committee of debenture holders.

Nippon India Mutual Fund, SBI Mutual Fund, Indian Iron and Steel PF, an arm of sovereignbacked SAIL, Oriental Bank of Commerce, Frank Ross - an Emami group company, the National Bank for Agriculture and Rural Development (NABARD), Maharashtra government-owned SICOM invested in these bonds, once rated AA+, a notch lower than the topmost grade. Reliance Capital and institutional investors did not reply ET’s email seeking comment.
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The bonds were sold via public issuance in December 2016. The first series are scheduled to mature in the first week of January, but the borrower needs to pay in full principal and interest in case of default. Those bonds have various maturities. Earlier in November, IDBI Trusteeship, the custodian of bonds that acts on behalf of investors, called a formal meeting to discuss the matter after the company was downgraded to ‘D’ or default category. Swapan Kumar Bagchi, MD & CEO of IDBI Trusteeship Services, wrote to the RHFL chief investment officer on November 19 recalling its entire loan amount in the immediate maturity date on January 3. “In case you fail to make the payments…, the trustee shall be constrained to take such steps as may be advised for enforcing the securities and realising the dues at your own risk,” the letter said.

The trustee charged a penal interest rate of 12% applicable from November 19 this year, whereas the sum would be at Rs 2,822 crore excluding interest rates.


In September, rating companies including CARE cut RHFL’s creditworthiness to ‘D’ or default category citing delay in servicing principal amount in one of the debenture series. Reliance Capital, the parent company, too faced the same rating fate. Since you have committed defaults in observance and performance of the conditions…the Trustee has become entitled to recall the entire principal amounts of the debentures, interest and all other amounts due, it said. Lenders have signed an inter-creditor agreement for find a resolution plan for RHFL.

At the beginning of the financial year, RHFL — swamped by credit rating downgrades — sought to raise funds through the sale of fresh equity.---ET




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