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Oaktree Hints at Legal Action Over 'Misrepresentation' of DHFL Offer After Piramal Cap Emerges as Top Bidder

Oaktree Hints at Legal Action Over 'Misrepresentation' of DHFL Offer After Piramal Cap Emerges as Top Bidder
Ahead of the crucial three-week long voting to decide on the new owner of troubled lender Dewan Housing Fiance (DHFL),U.S.-based stressed assetbuyer Oaktree Capital, one of the bidders for DHFL, in a letter to the Committee of Creditors (CoC), has said that its offer for the troubled housing finance company is being consistently misrepresented and that evaluation of its financial proposals based on incorrect information may be subject to judicial, administrative and investigative review.

Oaktree has written to lenders and the RBI hinting at legal action if its revised bid is not considered. This comes after Piramal Capital on 24 December 2020 appraised its total offer for DHFL to Rs 38,250 crore, Rs 1,832 crore higher than Oaktree's commitment of Rs 36,418 crore.

According to Oaktree, in spite of presenting a bid that offers maximum value for all stakeholders, there appears to be a consistent campaign to misrepresent information on its proposals.

Oaktree and Piramal group are in a close race for DHFL. The Adani group is also one of the bidders.

Thrust of  Oaktree letter read as follows:

  • In terms of total recovery being offered to Financial Creditors as well as net present value, Oaktree’s financial proposal is clearly superior to all other PRAs.
  • Information is not only being presented in an incomplete and inaccurate manner but also in order to discredit Oaktree’s bid and favour the Second Highest Bidder.
  • Its bid's net present value is Rs 36,418 crore, higher than the 34,966-crore bid of the second-highest bidder.
  • If Oaktree’s bid were to be evaluated on the basis of incorrect information or an erroneous presentation of the financial proposal, such evaluation would almost certainly be subject to judicial, administrative and investigative review
An Oaktree spokesperson, in a statement, reiterated that the company has become increasingly concerned that certain pre-determinations have been made in relation to the bids being presented by it.

"Oaktree submitted the highest total bid for DHFL in each successive round of the bidding process with our final bid providing a total recovery of INR 38,400 crores for lenders which is INR 1,150 crores higher than the 2nd highest bid and a net present value of INR 36,418 crores for lenders which is INR 1,452 crores higher than the 2nd highest bid," stated the spokesperson.

"Lenders have compared the 2nd highest Bidder’s proposal to infuse fresh equity capital into a co-mingled entity on an uncommitted basis with Oaktree’s proposal to infuse equity capital in a clean entity for the sole benefit of DHFL creditors on a committed basis," the spokesperson added in the statement.

A Piramal spokesperson termed claims made by Oaktree in its latest letter to CoC as "mistaken belief".

Piramal has argued that the Oaktree offer is short on upfront cash, on net present value, on overall score, is un-implementable due to insurance related complications and “leaves DHFL lenders with weak debt paper due to the sub debt structure offered by Oaktree to themselves”.

The spokesperson for Oaktree said that "This mail from the applicant appears to be under the mistaken belief that threatening COC members with consequences is going to alter these facts and change the course of a legally run, transparent process in our country,"

The Brookfield-owned fund had in the past written several letters to the CoC and even the RBI representatives alleging favouritism in the bidding process, which, it said, was affecting the credibility of the whole Insolvency and Bankruptcy Code (IBC) process among global investors.


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