Lenders clear Jaiprakash Associates recast plan

Group flagship spared insolvency process, Jaypee Infratech to be referred to NCLT

Lenders have spared Jaiprakash Associates from insolvency proceedings after clearings its loan recast package.

However, group company Jaypee Infratech is set to be referred to the National Corporate Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code (IBC). 

Lenders have approved in principle the debt recast for Jaypee group flagship Jaiprakash Associates and will issue a formal clearance on Thursday. The draft recast plan had been circulated among the lending banks, bankers said.

According to the plan, Jaiprakash Associates’ land bank worth Rs 13,000 crore will be transferred to a new special purpose vehicle that will be controlled by the lenders. The land will be sold to recover loans.

The Reserve Bank of India (RBI) had earlier asked banks to make at least 25 per cent provisions on their exposure to the Jaiprakash Associates.

Jaiprakash Associates has sold several assets in the last two years to pare its debt. The company reported a standalone debt of Rs 23,758 crore in March after it sold a cement plant and a grinding unit to Orient Cement for Rs 2,000 crore in October.

The company, which had Rs 29,000 crore of debt in March 2016, had also announced the sale of its cement units in central and western India to UltraTech Cement, but the transaction is not yet complete. Once the UltraTech deal goes through, Jaiprakash Associates will transfer another Rs 10,000 crore of debt to the Aditya Birla group company. The rest of Jaiprakash Associates’ debt can be serviced by its residual cement and power businesses.

Jaypee group chairman Manoj Gaur did not respond to queries on the recast plan. Bankers clarified that Jaypee Infratech would be referred to  the NCLT. Jaypee Infratech, a subsidiary of Jaiprakash Associates, has Rs 9,200 crore of debt.

Bankers said many companies were working on restructuring their debt even before the RBI asked banks to refer cases to the NCLT. However, since the arrest of former IDBI Bank chairman Yogesh Agarwal in January for a loan approved in 2010, banks have been reluctant to recast loans.

“These proposals could be presented as resolution under the bankruptcy code to the NCLT,” said Sapan Gupta, partner and head of the banking and finance practice of Shardul Amarchand Mangaldas.

Shares of Jaiprakash Associates closed 4.7 per cent higher on the Bombay Stock Exchange on Wednesday at Rs 15.35.