Jaiprakash Associates Limited (JAL) is grappling with a colossal debt of INR 52,000 crore (approximately USD 6.5 billion). While the company's founders offered personal guarantees totaling INR 778 crore (about USD 97 million), this covers less than 2% of the total debt. Following a petition by ICICI Bank, JAL was admitted to bankruptcy court, highlighting the limited value of these guarantees. Creditors, led by State Bank of India with claims over INR 15,000 crore and ICICI Bank with claims exceeding INR 9,200 crore, are focusing on monetising JAL's assets, including hotels, cement plants, and prime real estate, to recover their funds.
Jaiprakash Associates Limited (JAL), an infrastructure and real estate company, is facing a mountain of debt - INR 52,000 crore (approximately USD 6.5 billion). While the company's founders provided personal guarantees for some of this debt, these guarantees are a mere INR 778 crore (approximately USD 97 million) - a tiny fraction of the total owed. As a result, creditors are focusing on recovering funds by selling JAL's assets.
Documents reveal that JAL's chairman offered personal guarantees totaling INR 778 crore. However, this amount represents less than 2% of the total debt. JAL was admitted to bankruptcy court last month after a creditor, ICICI Bank, filed a petition in 2018. This highlights the limited value of the personal guarantees offered by the company's founders nearly seven years after the Reserve Bank of India (RBI) first identified JAL as one of 26 large loan defaulters in 2017.
Since the personal guarantees are unlikely to cover the full debt, creditors are turning their attention to JAL's assets. These include hotels, cement plants, and real estate properties located in key locations like Delhi, Agra, Noida, and Mussoorie. Creditors hope to monetise these assets, including JAL-owned hotels, five cement units, and land holdings near Noida, to recover the money owed to them.
State Bank of India (SBI) is the largest creditor, with claims exceeding INR 15,000 crore. ICICI Bank is another major creditor, with claims of over INR 9,200 crore. These banks, along with other creditors, will have a first claim on the proceeds from the sale of JAL's assets.
The bankruptcy process for JAL is likely to be complex. While the personal guarantees provide some security for creditors, the primary focus will be on selling assets to recover as much of the debt as possible. The success of this process will depend on market conditions and the value of JAL's assets. It remains to be seen how much these assets will ultimately fetch and whether creditors will be able to recoup a significant portion of the massive debt owed to them.
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