Indian non-bank lender Dewan Housing Finance Ltd (DHFL) grew quickly by borrowing from the wholesale markets to lend to lower and middle income retail borrowers, developers and other firms in the housing industry.
By mid-2019, a liquidity crisis was paralysing non-bank lenders, including DHFL. It had a coupon payment coming due on one of its bonds and had extended every credit line it had access to.
To help find a solution for DHFL, SC Lowy spent significant time looking at the firm’s loan book to identify loans it could help securitise. Together we selected a $250 million to a real estate development in central Mumbai. Optimal structure was used that allowed DHFL to sell the loans at face value to a specifically created trust which gave them the capital they needed to meet their coupon deadline. SCL ensured investment was secured through a bespoke structure.
The deal allowed DHFL to acquire enough capital to pay its interest payments to avoid a default. In addition, the firm avoided seeing its credit rating downgraded and gave it breathing room to find other means to improve its financials. The transaction further demonstrates SC Lowy’s ability to quickly and accurately value distressed assets along with executing complex deals in India’s high-yield bond industry.