Bad Bank kicks off with Jaypee for systemic resolution of large complex assets – By Kajal Bhatia, Legal Analyst at India Debt Resolution Company Ltd.

Bad Bank kicks off with Jaypee for systemic resolution of large complex assets

Kajal Bhatia
Legal Analyst at India Debt Resolution Company Limited (IDRCL)

Jaypee Infratech Limited becomes the first acquisition of India’s revolutionary Bad Bank, signalling a promising future for distressed assets. The Bad Bank, which is a twin structure comprising of National Asset Reconstruction Company Limited (NARCL) and India Debt Resolution Company Limited (IDRCL), has been established to facilitate the effective resolution of large and complex non-performing assets (NPAs), in line with the announcement made by the Hon’ble Finance Minister in the Union Budget of February 2021.

The acquisition of debt of Jaypee by the Bad Bank has brought a ray of hope for lenders who were struggling to recover their outstanding dues and awaiting home buyers who have been eagerly waiting for a resolution. Jaypee was responsible for operating and maintaining the Yamuna Expressway and developing adjoining real estate.  The CIRP of Jaypee was initiated in August 2017. The resolution process witnessed two very credible applicants, NBCC (India) Limited and a consortium of Suraksha Realty Limited and Lakshdeep Investments and Finance Private Limited (Suraksha), who competed fiercely for the acquisition of Jaypee. Eventually, the resolution plan proposed by Suraksha was approved by the Committee of Creditors with 98.66% votes. The Hon’ble NCLT Principal Bench, Delhi approved the Resolution Plan on 07.03.2023.

In the interregnum, NARCL acquired approximately 94% of the outstanding debt of the lenders, i.e., Institutional Financial Creditors through the Swiss Challenge Method Bidding undertaken by lenders. This method allows third-party bidders to submit competing bids. This competitive process ensures a transparent market-based value discovery and achieves the best possible deal for the lenders.

The said debt was acquired for a purchase consideration of Rs. 3,570 crores by way of 15:85 cash and security receipts (SR) structure, where 85% SRs issued to lenders are backed by the Government of India guarantee, providing assurance to the lenders. The debt aggregation of this kind is key for efficiently resolving such complex NPAs that have multiple stakeholders and varied business requirements.

IDRCL, is an exclusive advisor and resolution manager for debt aggregation by NARCL. This innovative approach of combining the expertise of the ARC and skill set of an expert resolution manager will have a transformative impact on the overall economy.

 To sum it up, the first transaction by Bad Bank is a landmark event in the history of India and particularly in the Banking sector. It is expected to have far-reaching benefits for all the stakeholders.


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