Deutsche Bank buys Rs 1,900 crore DHFL bonds in just 3 days

MUMBAI: Deutsche Bank has purchased Rs 1,900 crore worth of DHFL bonds in just three days, marking the revival of the secondary market of distress asset sales after 3-4 months of lull since the Covid-19 outbreak.

A group of mutual funds including Mirae Assets, Principal, HSBC, L&T, Edelweiss and PGIM India have sold those papers at about 78 percent discount last week, multiple sources with direct knowledge of the matter told ET.

Many of those bonds matured in 2019. Only three sets of papers are to mature in 2023 and 2028. All papers were traded at a price range between Rs 22-23, nearly one-fifth of their face value.

L&T Mutual Fund and Edelweiss Asset Management are the two largest sellers of bonds, sources said. Individual investors could not be contacted immediately. Deutsche Bank declined to comment on the matter.

"After a long break of 3-4 months, we see hectic activity as distress borrowers began to deal in junk papers amid ample liquidity in the system," said Ajay Manglunia, managing director, head - fixed income at JM Financial. "This is for the first time bonds are trading at such a deep discount after the pandemic triggered a complete lockdown in businesses.”

“Investors are betting on revival chances of DHFL," he said.

The Securities Exchange Board of India (Sebi) permitted mutual funds to transact on bonds matured and defaulted from July 1, 2020.

“The Sebi ruling is paving way for other matured and defaulted bonds that in turn will help generate liquidity in mutual fund portfolios,” said a fund manager who sold DHFL papers to Deutsche Bank. DHFL bonds have traded first after the Sebi ruling.

The Reserve Bank of India-appointed administrator now runs the indebted Dewan Housing Finance Company (DHFL) that is in a resolution process under aegis of the National Company Law Tribunal.

The committee of creditors (CoC) of the home financier decided to extend the deadline for submission of bids for the company till July 24. The bidders for the company had appealed to the administrators to relook at the timeline in the aftermath of the coronavirus-triggered lockdown.

DHFL had earlier shortlisted 22 out of 24 applicants for the resolution of the troubled company. It had given applicants the option to bid for the whole company or in parts.

More than a dozen had submitted expressions of interest (EoIs) for the entire business of DHFL. Adani Group, Oaktree Capital, KKR India Financial Services, Bain Capital, Welspun Group were among suitors who placed EoIs to take over the entire business.