Jaiprakash Associates Limited owes its lenders over Rs 30,000 crore and the sale of its cement assets is a vital component of its debtreduction strategy.
NEW DELHI: ICICI Bank, the lead banker for Jaiprakash Associates Limited (JAL), has invoked the strategic debt restructuring (SDR) provision, setting in play the process that could pave the way for the lenders cumulatively taking over the company. The development comes amid uncertainty over the sale of JAL’s cement assets to Kumar Mangalam Birla-owned UltraTech Cement.
According to people familiar with the development, UltraTech wants to reduce the ticket size of the Rs 15,900-crore transaction by cherrypicking only some of the assets, now possible under the recently amended Mines and Minerals Development and Regulation (MMDR) Act.
Sensing trouble, JAL and its lenders have sent feelers to other potential suitors, including JSW Group, some private equity firms such as KKR, and special situation funds scouting for large distressed opportunities in India.
The Aditya Birla Group has reacted to the developments promptly, and earlier this week UltraTech Cement is believed to have shot off letters to JAL’s lenders saying it has entered into a binding agreement with the company and that it is illegal to engage with anyone else for any negotiations for these assets.
JAL owes its lenders over Rs 30,000 crore and the sale of its cement assets is a vital component of its debtreduction strategy. Unsettled by the uncertainty over the transaction, ICICI Bank initiated the process of invoking SDR in a meeting of the joint lenders’ forum (JLF) on Tuesday.
“JLF will have three months’ time to either approve the SDR or reject it. During this period, the lenders will treat JAL as a regular account,” said a person familiar with the development.
The SDR process can be triggered when a company defaults on its repayment schedule. But until the time the lenders’ forum takes a call on SDR, the loan is not considered a non-performing asset.
A JAL spokesperson confirmed that ICICI Bank has marked the reference date of SDR as June 28. But she did not comment on ongoing discussions with UltraTech or other suitors. “We have nothing more to add,” she said.
ICICI Bank declined to comment. "ICICI Bank does not comment on client specific information," ICICI Bank spokesperson said.
An Aditya Birla Group spokesperson said the transaction with UltraTech was on course but declined to comment on whether letters have been sent to lenders warning them not to endorse the sale of cement assets to any other party.
In February this year, UltraTech agreed to buy Jaypee’s 21.2 million tonnes per annum (MTPA) cement capacity while leaving out just 10.6 MTPA of their portfolio in Madhya Pradesh, Uttar Pradesh, Andhra Pradesh and Karnataka. The payment was expected to take place by June.
Banking industry executives say UltraTech now wants to tweak the deal and buy only a few select assets out of the pre-agreed 21MTPA. “UltraTech was also asking to reduce the deal size from Rs 15,900 crore to adjust the transfer fee that they need to pay for transfer of mines under the new MMDR Act,” said one of the persons quoted above.
But the Gaur family, which owns JAL, and their lenders have refused to adjust the amount in the deal size.
There are two conflicting views about the parallel discussions with alternative suitors. A leading financial investor said the lenders and JAL are using these as negotiating tactics to pressure Ultra-Tech to stick to the original deal, and added that the Aditya Birla Group company remains the frontrunner to seal the transaction.
But officials from two banks which are part of the lenders’ forum said negotiations with Sajjan Jindal’s JSW are at an advanced stage and that the Mumbaibased company is willing to offer a better deal, both in terms of ticket size as well as payment schedule, than Ultra-Tech. JSW had held discussions with JAL promoters in the past, but talks had broken down over valuation differences. The JSW spokesperson did not reply to ET’s query on the issue.
KKR, the private equity major, had earlier evinced an interest in the cement assets of JAL and is believed to have been approached again by the lenders. A KKR official declined to comment.
People familiar with the development said if a new party steps in now, it would have to complete the transaction by September 28, as the lenders’ forum will have to take a decision on SDR by then.