Indiabulls Housing Finance has teamed up with Oaktree Capital to acquire a $5 billion chunk of loans given by the non-banking finance company to bankroll several developers. The acquisition will take place through a jointly formed special purpose vehicle, with Oaktree Capital investing 73,000 crore and Indiabulls Housing Finance investing 2,000 crore. The joint entity will acquire these loans extended to developers by Indiabulls Housing Finance, thereby providing an immediate exit and liquidity to the NBFC.
Indiabulls Housing Finance has partnered with Oaktree Capital to buy a significant portion of loans provided by the non-banking finance company to fund various developers. The two companies will subscribe to debentures issued by a jointly formed special purpose vehicle (SPV) that will raise funds through debt capital.
Oaktree Capital will invest ?73,000 crore, while Indiabulls Housing Finance will invest ?2,000 crore, and the SPV will acquire the loans, providing immediate liquidity to the NBFC. The developers are expected to repay the loans over time based on the project's completion and sales cycle, while the SPV will pay back the debentures when the recovery takes place.
According to sources, the SPV has already been created, and the fund infusion is expected to occur over the next few weeks. The joint venture will enable Indiabulls Housing Finance to exit these loans, while Oaktree Capital will acquire these loans without any changes to the underlying terms.
Indiabulls Housing Finance's loan book is currently valued at around ?274,000 crore, and this deal with Oaktree Capital could be seen as a model for future transactions, as another ?2,700 crore deal is already in the works. In June 2020, Indiabulls Housing Finance raised over ?72,000 crore from Oaktree Capital by pledging some of its loans extended to realty developers. Oaktree Capital acquired non-convertible debentures guaranteed by an underlying real estate portfolio valued at nearly $4,500 crore.
In recent years, finance firms have made more complex deals by setting up alternative investment funds with foreign investors, where the latter had the first claim on recovery. However, such senior-junior deals have now stopped after banks and realty funds drew the attention of the capital market regulator.
In recent years, the Indian real estate market has faced numerous challenges, including liquidity issues, regulatory changes, and the COVID-19 pandemic's impact on the economy. Many real estate developers have struggled to repay their loans, causing NBFCs to look for alternative solutions, such as partnerships with foreign investors, to obtain liquidity. Oaktree Capital's partnership with Indiabulls Housing Finance is a testament to the market's growing interest in such partnerships.
In addition, Oaktree Capital is no stranger to partnering with Indian companies. In 2019, the company acquired a majority stake in DHFL's loan portfolio in partnership with Piramal Capital and Housing Finance. In 2020, it also acquired a controlling stake in Srei Equipment Finance. Oaktree's partnership with Indiabulls Housing Finance demonstrates the company's continued interest in investing in the Indian market and the NBFC sector.
Indiabulls Housing Finance's partnership with Oaktree Capital will enable the company to exit some of its loans while providing immediate liquidity. This partnership is an indication of the growing interest in alternative solutions for liquidity issues in the Indian real estate market, and it is expected to set a precedent for future transactions.
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