Lenders likely to resolve JAL insolvency through a challenge mode

The lenders of Jaiprakash Associates Limited (JAL) are likely to opt to invite all the resolution applicants to bid for the company in a challenge mode, placing their offers real time to match the highest bid, according to people in the know.

 

“The nuances of the challenge mode are yet to be decided as there is no legally prescribed format for a challenge. This would entail timelines, the base plan. It is expected to be conducted like a secret auction where each company would submit their bid in isolation,” said a source close to the development.

 

The five resolution applicants - Adani Group, Dalmia Group, Vedanta Group, Jindal Power (JPL), and PNC Infratech- had submitted revised plans for the conglomerate after the committee of creditors (CoC) asked to do away with conditionalities in their plans.

 

The CoC has raised further red flags in the plans and asked the bidders to submit updated plans within a week, according to people in the know.

 

Creditors’ total admitted claims against JAL stand at over ₹59,000 crore. In all offers, the banks will end up taking a haircut of up to 79 per cent of their claims.

 

The company entered insolvency on June 3, 2024. Its asset base spans cement, real estate, infrastructure, hospitality, and marquee developments like Jaypee Greens, Wish Town, and the International Sports City near the upcoming Jewar Airport.

 

Most bids remain contingent on the outcome of a key legal case surrounding Jaiprakash’s 1,000-hectare Sports City project in Greater Noida. One of the bidders Jaypee Infratech, now owned by Mumbai based Suraksha group, is planning to move court to appeal against the rejection of its offer by the resolution professional citing lack of adequate earnest deposit money.

 

In March, the Allahabad High Court had upheld a decision by the Yamuna Expressway Industrial Development Authority (Yeida) to cancel the land allotment. The matter is now pending before the Supreme Court.

 

Incorporated in 1995, JAL’s total assets are over ₹36,140 crore, with real estate having the largest share making up ₹19,119 crore. The total revenue of the company for FY24 was ₹6,568 crore.

 

ICICI Bank and other Indian lenders, meanwhile, have sought to offload their stakes in the power business of bankrupt Jaiprakash Associates by selling in the open market compulsory convertible preference shares (CCPS) that have a face value of ₹3,800 crore.