Billionaire Banned From Markets Increases DLF Risk
The risk of India’s biggest property developer reneging on its debt in the year has surged to a 2009 high after it was barred from capital markets by the regulator.
The median probability of nonpayment by DLF Ltd. (DLFU) jumped as high as 0.33 percent this month from 0.21 percent at the end of September. The company and its billionaire Chairman Kushal Pal Singh were barred from raising funds by the Securities and Exchange Board of India, or SEBI, on Oct. 13 for failing to disclose information during its 2007 initial public offering.
The ban threatens to hinder the builder’s efforts to reduce its debt burden by replacing bank loans with cheaper funds raised from securities markets.
“If I held DLF’s debt instruments, I would get out of it as the risk is going up,” P. Phani Sekhar, a Mumbai-based fund manager at Angel Broking Ltd., said in a phone interview on Oct. 23.
The SEBI, in an order posted on its website on Oct. 13, barred the DLF officials from “buying, selling or otherwise dealing in securities, directly or indirectly, in any manner” for three years as the company suppressed information when it sold shares for the first time in 2007.
The ban is the “third negative legal development” for the developer in the past two months, according to Aashiesh Agarwaal, a Mumbai-based analyst at Edelweiss Securities Ltd. Provincial courts had earlier canceled an allotment of 350 acres of land in northern India to the company.
Restrictions imposed by the SEBI would affect DLF’s plans to raise capital from sales of commercial mortgage-backed securities, or CMBS, and real-estate investment trusts, according to Crisil.
DLF is rated A, the sixth-highest investment grade, at Crisil and at ICRA Ltd., a unit of Moody’s Investors Service.
DLF may have to “resort to large asset sales to reduce debt,” Abhishek Bhandari, Mumbai-based analyst at Macquarie Capital Securities India Ltd., wrote in an Oct. 14 note.
Source: bloomberg- Billionaire Banned From Markets Increases DLF Risk
