Lenders in talks to sell debt-laden Jaiprakash Associates loans to NARCL

Delay of over 5 years in debt resolution via IBC prompts the move

The lenders to debt-laden Jaiprakash Associates are in talks to sell part of their loans to National Asset Reconstruction Company Ltd (NARCL), even as petitions filed by ICICI Bank and State Bank of India for a debt resolution under the Insolvency and Bankruptcy Code, 2016, are still pending before the Allahabad Bench of the National Company Law Tribunal (NCLT).

ICICI Bank filed its plea in September 2018, while SBI moved the NCLT in September last year.

The massive delay in debt resolution in the NCLT has prompted the lenders to initiate negotiations for selling part of the loans to NARCL, said a source close to the development. “The negotiations are currently focusing on the pricing and quantum of the debt sale,” the source added.

Emails sent to NARCL and Jaiprakash Associates did not elicit any response.

On September 6, Jaiprakash had disclosed that it defaulted on loans to the tune of Rs 4,151 crore to its lenders. The amount included Rs 2,486 crore as interest and Rs 1,665 crore as principal as of August 31.

According to the company, its total borrowing, including interest, stood at Rs 29,361 crore, repayable by 2037. Of this, Rs 4,151 crore was overdue as on August 31. The company stated that Rs 18,502 crore would get further reduced on transfer to the proposed special purpose vehicle (SPV) for which the scheme of arrangement, duly approved by all the stakeholders, was pending sanction of the NCLT. The entire loan was, in any case, under restructuring, it said.

In December last year, the company had signed an agreement for the divestment of its cement, clinker and power plants, with respective capacities of  9.4 million tonnes per annum, 6.7 million tonnes per annum, and 280 MW, to Dalmia Cement (Bharat). The cement and power plants, situated in Madhya Pradesh, Uttar Pradesh, and Chhattisgarh, are to be divested at an enterprise value of Rs 5,586 crore. The deal has not been concluded as yet.

Corporate lawyers said the delay in debt resolution since September 2018 had created uncertainty for the lenders. The entire debt resolution process should be completed in a timely manner to achieve the effectiveness of debt resolution under the IBC, they added.

“The entire edifice of the IBC, 2016, is based on timelines. It is imperative that in case the default is established, the corporate insolvency resolution process should be admitted against a corporate debtor in a timely manner upon filing an appropriate application by financial creditors,” said a corporate lawyer.

STORY SO FAR

-- Lenders awaiting resolution after Jaiprakash Associates defaulted on debt repayment in 2017 

-- ICICI Bank filed bankruptcy case under IBC in Sept 2018

-- State Bank of India filed a bankruptcy case in Sept 2022

-- The petitions of both ICICI Bank and SBI are pending in NCLT, Allahabad

-- Jaiprakash Associates sold its cement unit to Dalmia Cement in Dec 2022, awaiting court approval