Embassy Group co in talks with HDFC over loan default


MUMBAI : Embassy Property Development Pvt. Ltd (EPDPL) is in discussions to repay a construction finance loan of 82 crore from HDFC Ltd after defaulting on it on 31 October.

Acuite Ratings downgraded market-linked debentures of 2,905 crore issued by the Bengaluru-based real estate developer from BB+ to C following delays in servicing the interest for the loan, it said in a report on 11 November.

HDFC is considering the Embassy Group’s proposal to convert the loan into a lease rental discount (LRD) facility, which will help the company repay it, a spokesperson of the company said. “HDFC Ltd has sanctioned various construction finance (CF) facilities to EPDPL for the construction of Embassy Splendid Techzone in Chennai. Part of the CF facilities funded by HDFC are already converted into LRD facilities and as a normal process other CF facilities funded by HDFC will get repaid by getting converted into LRD facility.”

The delay in repaying the loan was due to regulatory issues around the REIT acquiring the Chennai project, the spokesperson said. The acquisition proceeds were to be used to close the loan outstanding due to HDFC. “It was anticipated that the project will be ceded to Embassy Office Parks REIT by 30 September 2022. However, the project has been delayed by a few months because of regulatory compliances related to acquisition. Hence, processing of the LRD facility has taken some time,” he said.

Acuite Ratings, however, said EPDPL continues to see delays in servicing the interest obligations for other loans as well, reflecting liquidity issues.

As on June-end, total debt outstanding for EPDPL was 4,137.25 crore, including accumulated interest on non-convertible debentures (NCDs) against the sanctioned debt of 4,418.10 crore. The firm’s debt comprises NCDs of 2,000 crore, term loans, construction finance loans, and inter-corporate deposits from non-banking financial companies, banks and group firms.

“Credit bureau reports said some unrated loan accounts of EPDPL are not regular. High debt levels raises concerns on liquidity. Refinancing debt has not happened in a seamless manner. The proposed merger with Indiabulls Real Estate, could be value accretive, but may not translate into sizeable cash flows for the near term. That said, its financial flexibility in the form of asset monetization via REIT will remain,” said Suman Chowdhury, chief analytical officer, Acuité Ratings.

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