Indiabulls Housing Finance ropes in Oaktree Capital to buy its loans

MUMBAI: Indiabulls Housing Finance will cut a 5,000 crore deal with global investor Oaktree
Capital to acquire a chunk of loans given by the non-banking finance company to bankroll several
developers.
The infusion of debt capital will happen through a jointly-formed special purpose vehicle (SPV) which
would float instruments like debentures that Indiabulls and Oaktree would subscribe to.
The SPV has already been set up and the fund infusion is expected over the next few weeks, said persons
aware of the plan.
Oaktree Capital will be infusing 3,000 crore in this joint entity, while Indiabulls Housing Finance will
invest 2,000 crore.
“Oaktree Capital will hold a 60% stake in this newly created entity, while the balance will be with
Indiabulls Housing Finance in line with their capital commitment,” said one of the persons mentioned
above. “Loans that would be acquired, along with underlying mortgaged properties, are not stressed loans
and the underlying terms of the loans would remain unchanged,” he said.

The joint entity, through this transaction, will acquire these loans extended to developers by Indiabulls
Housing Finance thereby providing an immediate exit and liquidity to the NBFC.
These loans are expected to be repaid by the developers over time, based on the completion of the project
and at the end of the sales cycle. The SPV will then repay the debentures as and when the recovery takes
place.
It is understood that Indiabulls Housing Finance may consider the deal with Oaktree as a model for future
transactions. Another 2,700 crore deal is in the pipeline.
In the last few years, some of the finance companies had struck more complex deals by setting alternative
investment funds with foreign investors where the latter had the first claim on recovery. The money
pooled into the AIFs was used to finance builders who were showing early signs of stress, while the
developers issuing debentures to the AIF used the debt capital to repay the finance company.
Unlike in the present deal, in such transactions, the foreign investors held senior notes and were the first
to receive money that the fund distributed. However, such senior-junior deals have now stopped after
some of the banks and realty funds drew the attention of the capital market regulator.
Currently, Indiabulls Housing Finance’s loan book size is around 74,000 crore.
Prior to this, in June 2020, Indiabulls Housing Finance had raised over 2,000 crore from Oaktree Capital
Group by pledging a part of its loans extended to realty developers.
Under the deal in 2020, Oaktree Capital acquired non-convertible debentures sold by Indiabulls Housing
Finance. The debentures were guaranteed by an underlying real estate portfolio valued at nearly 4,500
crore.
Oaktree Capital declined to comment, while ET’s email query Indiabulls Housing Finance remained
unanswered until Sunday press time.
The Bombay Stock Exchange and the National Stock Exchange have recently approved the
reclassification of promoter Sameer Gehlaut and his trusts to the category of public shareholders. He
resigned from the company’s non-executive director post in March 2022.
Gehlaut and his trusts, with a 9.66% holding in Indiabulls Housing, had made an application in April 2022 for the reclassification to the public shareholder category.