ICICI Bank evokes SDR for Jaypee Associates; 25th such case
Moneylife Digital Team 01 July 2016
ICICI Bank Ltd has evoked its strategic debt restructuring (SDR) provision in Jaypee Associates Ltd (JAL). According to Religare Capital Markets Ltd, so far lenders have evoked SDR in 24 companies with a total debt of Rs2 lakh crore, including Rs70,000 crore (consolidated) for Jaypee. 
 
"Banks have highlighted that it is difficult to find new buyers in 18 months for companies in the troubled sectors with high debt where investors' interest is low. Banks are now looking to change the management outside the SDR window. A management change outside the purview SDR will give more time to banks in finding new buyers and selling the stake after new management is in place," Religare said in a research note.
 
ICICI Bank's decision to evoke SDR in Jaypee comes amidst uncertainty over the sale of JAL's cement assets to UltraTech Cement. UltraTech wants to reduce the ticket size of the Rs15,900 crore transaction by cherrypicking only some of the assets, now possible under the recently amended Mines and Minerals Development and Regulation (MMDR) Act.
 
Jaypee's standalone debt is about Rs28,000 to Rs30,000 crore while its consolidated debt is around Rs70,000 crore.
 
Earlier, in February, UltraTech had 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. 
 
 
According to Religare, banks are finding it very difficult to turnaround SDR cases given several difficulties under the process and market condition. Banks have dropped cases like Alok Industries, which has a debt of Rs15,300 crore and ABG Shipyard with a debt of Rs11,000 crore sighting difficulties in finding new management in 18 months, it pointed out.
 
 
As per the research note, at present there are 20 active SDR cases with a debt of Rs1.6 lakh crore. There were 24 companies, however, later landers cancelled SDR in four companies, Surana Industries, Educomp, Alok Industries and ABG Shipyard.
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