IDBI Trustee allows vote in RHFL after Bombay HC go ahead

IDBI Trusteeship Services Ltd the trustee for bond holders in the debt laden Reliance Home Finance Ltd (RHFL) has called for voting by bond holders of the company on the resolution plan submitted by non banking finance company (NBFC) Authum Investment and Infrastructure after a Bombay High Court (HC) order allowing for the same, increasing chances of the completion of a resolution that has been hanging for almost a year.
In a notice to the stock exchanges IDBI Trusteeship has called for a meeting of debenture holders of RHFL on May 13. Lenders to RHFL led by Bank of Baroda (BoB) and Yes Bank had already approved Authum’s plan in June last year but bond holders constitute 41% of the debt.

IDBI Trusteeship had so far refrained from calling a meeting of the bond holders because rules by Securities and Exchange Board of India (SEBI), the regulator for bond holders, said the voting cannot be held based on the trust deed signed by the bondholders. The deed signed as per central bank guidelines expects only 75% of the bondholders to vote, but Sebi's rule says all debenture holders must participate in such proposals.

The single judge bench of R I Chagla relied on another bench order in October allowing bond holders to vote in the debt resolution of Reliance Commercial Finance Ltd (RCFL), overruling an objection by Sebi. Subsequently, a two judge bench of SJ Kathawala and MN Jadhav also upheld the single bench order. SEBI has however appealed in the Supreme Court. It remains to be seen where the stock market regulator will seek a stay on the RHFL vote in the apex court.

Authum's offer for RHFL was cash upfront of Rs 1724 crore and a further Rs 300 crore through 8% NCDs payable within one year, effectively giving creditors a 82% haircut on the Rs 11,200 crore owed by RHFL to them. Over 90% of the lenders led by Yes Bank with 13% of the debt and lead lender Bank of Baroda (BoB) with close to 11% have approved the plan.

BoB Capital Markets, the investment banking arm of BoB, and consultancy firm EY are helping lenders with the process. RHFL is among the biggest in Anil Ambani's financial services portfolio, which includes commercial finance and insurance businesses.