On 3 June, the National Company Law Tribunal (NCLT) admitted Jaypee Associates Limited (JAL) for insolvency proceedings. This decision came after a petition was filed by a consortium of lenders led by ICICI Bank. The lenders approached the NCLT due to JAL's inability to meet its financial obligations. The insolvency process aims to resolve JAL's debt issues and identify a suitable resolution for the creditors. The company plans to refinance borrowings and sell its assets, including real estate and cement plants, in order to reduce the debt burden. Legal provisions may allow JAL to withdraw from insolvency proceedings, pending creditor approval.
The Jaypee Group, which is struggling financially, is seeking to raise INR 10,000 crore through high-cost financing from global credit funds such as Varde Partners, Ares, Cerberus, and Hillhouse. This move aims to save its flagship company, Jaiprakash Associates (JAL), from bankruptcy, according to sources. The Jaypee Group is led by Manoj Gaur, who serves as both executive chairman and CEO.
The National Company Law Tribunal (NCLT) admitted JAL for insolvency proceedings on 3 June after lenders, including ICICI Bank, filed a petition. However, ongoing disputes with land authorities may complicate negotiations with the credit funds. A source familiar with the discussions mentioned that JAL seeks funds to refinance borrowings and plans to sell assets to reduce debt. JAL's assets include real estate on the Noida-Greater Noida expressway, cement plants, residential buildings, hotels, a hospital, and a Formula One racetrack.
Despite the significant assets, 28 banks have lodged claims totalling INR 48,000 crore against JAL, according to data from the Insolvency and Bankruptcy Board of India. This highlights the company's severe financial distress. A senior executive from one of the lending banks noted the essential value of JAL's asset-heavy profile, distinguishing it from typical construction companies.
Legal experts pointed out that the Insolvency and Bankruptcy Code (IBC) includes provisions to withdraw insolvency proceedings even after they have commenced. NPS Chawla, joint managing partner at Aekom Legal, explained that under Section 12A of the IBC, insolvency proceedings could be withdrawn if 90% of the creditors' committee approves. If the committee is not formed, the original applicant can file for withdrawal through the interim resolution professional, subject to the NCLT's order. Last November, JAL proposed a one-time settlement offer to banks, which was declined due to insufficient funds. As part of the proposal, JAL suggested transferring unsustainable debt into a special purpose vehicle collateralised by its land bank.
Despite the initial rejection, this strategy might still be pivotal in future negotiations as JAL continues its efforts to avoid liquidation. The Jaypee Group and the involved credit funds have not responded to inquiries, while Ares declined to comment. The outcome of these negotiations remains crucial for JAL's future and its efforts to navigate through the insolvency crisis.
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