Fund houses are seeking market regulator SEBI’s advice on providing support to distressed borrowers such as Dewan Housing Finance (DHFL), according to a report by The Economic Times.
“MFs are part of the same system and the same financial market. So, we are seeking SEBI’s guidance for being signatories to inter-creditor agreement (ICA) drawn up by banks and nonbanking finance companies. In this context, we are citing the example of DHFL,” a source told the paper.
Moneycontrol could not independently verify the news.
Fund houses need the market regulator’s advice on the method for restructuring the debt, the report said.
“Mutual funds require SEBI’s direction on whether they should offer ‘standstill’ arrangement with a borrower, elongate the maturity of bonds and debentures (as banks do for loans), or allow the conversion of a slice of the debt into equity,” the paper quoted the head of a fund house.
The decision by mutual funds to approach SEBI was triggered by the DHFL instance, where they fear getting a raw deal.
Fund houses are unhappy about the fact that DHFL’s secured creditors might have to take a haircut, while unsecured creditors will get paid in full, according to a media report.
Banks are not putting enough pressure on DHFL's promoters to raise capital, according to fund houses.
Around 10 mutual funds have exposure of around Rs 5,000 crore to DHFL.
While most banks have signed the ICA with DHFL, insurers and fund houses have expressed reluctance.
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