Jaypee Grp-UltraTech cement sale in limbo as banks invoke SDR

With the lenders invoking the strategic debt restructuring (SDR) option against debt-laden Japyee Group earlier this week, sale of its cement business to UltraTech for Rs 15,900 crore has come under a cloud.
Jaiprakash Associates, the flagship of the Group, owes over Rs 30,000 crore to a consortium of lenders led by ICICI Bank and the sale of its 21.2-million tonne cement business is very crucial for the promoters (the Gaur family) to continue in business.
The Jaypee Group had a consolidated debt of Rs 58,250 crore as of March 2016.
"The Jaypee Group is already an NPA non-performing asset) for SBI. The lenders have already invoked the SDR. The JLF (joint lenders forum) will shortly consider the cement sale. Our steering committee which will look into the Jaypee- UltraTech deal whether to accept it or not," a senior SBI official told reporters here.

The country's largest lender has an exposure of Rs 7,000 crore to JP Associates, which for long has been struggling to service its debt after its infra, led by roads and power business, had cash flow issues.
The company sold most of its power plants over the past two years and the sale of the cement business got stuck due to restrictions on mine leasing.

But the recent modifications in the Mines and Minerals (Development and Regulations) Act have paved the way for the company to transfer its coals mines along with the cement plants, which led to the Birlas agreeing to snap up the cement business late March.

The SBI official further said the lenders invoked the SDR, which allows banks to convert their loans into equity, after their request to treat this account as a standard one was turned down by the Reserve Bank earlier this week.
The banks were seeking a special treatment for the account, citing the ongoing sale of the cement business.
The regulator reportedly asked the lenders to make provisions for the account in the June quarter and write back the provisions into profit once the cement business sale is completed.
If the lenders convert their loans into equity, the company will be majority owned by banks.

Following this, the Aditya Birla Group firm UltraTech, which in late March agreed to buy the cement business of the Group for Rs 15,900 crore, has reportedly written to the Gaurs questioning non-disclosure of the development (invoking SDR by banks) to them as well as to the regulators and exchanges.
The comments come amid news reports that the JLF
(joint lenders' forum), led by private lender ICICI Bank, has decided to convert its debt into majority ownership under the SDR route.
The lenders have also reportedly decided to invoke the provisions at a meeting on Tuesday after uncertainties over the mega deal.

UltraTech and Jaiprakash Associates on March 31 signed an agreement for sale of the latter's cement division, which has a capacity of 21.2 million tonnes in factories located across five states.
Last December, UltraTech was keen to snap up the complete cement portfolio of the Jaypee Group for Rs 19,500 crore along with some private equity players. But the deal did not go through.
JP Associates was the third largest cement maker in the country with annual capacity of 31.65 million tonne. It had sold 13.3 MT capacity in 2014-15 to repay debts.
The company had earlier sold two cement units - in Gujarat and MP - to UltraTech for Rs 3,800 crore and Rs 5,400 crore, respectively.

It had sold its stake in the Bokaro cement unit to Dalmia Cement for Rs 667 crore and the Panipat-based grinding unit to Shree Cement for Rs 360 crore. The Group had sold its hydel power projects to JSW Energy for Rs 9,700 crore last year.
In fact, Jaypee Group is not alone in selling assets to repay debts. A host of large companies like Essar, Lanco, Videocon, GMR and GVK are selling assets as lenders exert pressure for timely repayment.
A Credit Suisse report late last year said the Jaypee Group had defaulted more than once in repaying loans in 2015. In February, JP Power defaulted on repayment of its USD 200 million foreign currency convertible bonds and had to renegotiate with lenders.

JP Power was downgraded to default category at the start of 2015. Rating agencies also downgraded its debt to default last July.
The JP Associates stock has lost more than three- fourths of its market value since last January. Today it closed at Rs 8.59, down over 3.2 per cent on the BSE whose main index jumped 0.55 per cent.
Its 52-week high was Rs 14.90 and the low was Rs 5.30. Once a Sensex heavyweight, the company today had m-cap of just Rs 2,089.52 crore.