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New India Assurance Entered An Inter-creditor Agreement for Debt Resolution

Published On Oct 14, 2019, Updated On Oct 26, 2020

New India Assurance entered an inter-creditor agreement with Dewan Housing Finance and Reliance Home Finance. The ICA agreement was entered for debt resolution of the ailing firms. Under the agreement, New India Assurance will have debt exposure to debt instruments of both the entities.

This is for the first time that a state-owned insurance company is entering an inter-creditor agreement for debt resolution. The extent of the debt exposure to the debt instruments is still not specified by the insurer.

The IRDAI has allowed the insurer to be part of the agreement to have the debt resolution process in a time-bound manner. New India Assurance has signed the deed of accession to enter into the ICA.

The Reliance Home Finance has downgraded the debt of worth Rs. 4979 Crore. The finance company subsequently informed that the lenders had directed the company to keep servicing only the interest obligation, whereas the debt resolution in terms of principal repayment will be made on parity.

On the other hand, Dewan Housing Finance has a total debt of around Rs. 1 Crore. The company has proposed to convert its debt into equity while seeking to sell its assets and raising capital from the same. Several times in the past, the company has defaulted on its obligations. Now, the company is considering several options, including selling off its stakes in group entities to pay off its debt. 

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