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DHFL fails to pay Rs 1,000 cr interest on bonds, debt schemes loose upto 53% of NAV

 

 Image result for DHFL CRISES

Dewan Housing Finance Ltd (DHFL) has missed Tuesday’s interest payment deadline on a set of outstanding bonds, as per reports the company is in talk with financiers to help meet its Rs 1,000-crore-plus obligation within the seven-day grace period and prevent a default.

Rating agencies Crisil, ICRA have downgraded DHFL’s CP rating to 'default' grade. “DHFL has Rs 850 crore of outstanding CPs of which Rs 750 crore is due in June 2019. The first CP maturity is on June 7, 2019. With liquidity inadequate as on date to service debt and visibility very low on timely fund raising, CRISIL expects the CP to be in default on maturity,” the rating agency

Meanwhile, ICRA has also downgraded the rating on the Rs 850-crore CP of DHFL to ‘D’ from ‘A4@’.

“The rating revision factors in further deterioration in company’s liquidity profile and delays in meeting scheduled debt obligation on June 4. While the mentioned debt is not rated by ICRA, given the stretched liquidity profile and limited visibility on fresh funding, company is unlikely to be able to service its debt obligation with regard to commercial paper programme in a timely manner,” the rating agency said.

The DHFL default and downgrade may have widespread implications not just for investors in NCDs, but also for mutual fund investors, given that as many as 164 schemes across 23 asset management companies (AMCs) are exposed to DHFL papers. Total industry exposure to DHFL alone (excluding group companies) is ₹5,183 crore, as on 30 April 2019, UTI Asset Management Co. has the highest exposure to DHFL papers, followed by Reliance Nippon Asset Management Ltd.

Corporate bond funds are mandated to hold 80% of their assets in debt with the highest credit rating and are perceived as relatively safe.

Debt schemes witnessed a massive fall yesterday as several schemes revealed sharp losses to their net asset values (NAVs). The worst hit was DHFL Pramerica Medium Term, which posted a loss of 52.99%. DHFL has seven-day grace period available to avoid an actual default scenario. But mutual funds have to mark down their exposure to DHFL by up to 75%, before an actual default is announced. The mark down caused severe losses, taking away a year’s worth of returns of a debt scheme, in a single day.






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