Jaiprakash Associates fails to pay interest on $150-mn bonds

Firm intends to discuss the issue with bondholders to arrive at a solution.

By: ENS Economic Bureau | Mumbai | Published: March 9, 2016 2:18 am

Strapped for cash, Jaiprakash Associates said on Tuesday it had missed an interest payment on $150 million worth of convertible bonds. In a filing to the exchanges, the Noida-based arm of the Jaypee Group said it has not paid interest, due semi-annually, on foreign currency convertible bonds (FCCBs) due on March 7, 2016.

“Interest was payable on the bonds on the semi-annual interest payment date of March 7, 2016. The issuer wishes to inform you that it has not paid such interest,” the notification on the BSE website, which was also marked to Singapore Stock Exchange, read.

JP Associates further added that it intends to engage in discussion with bondholders to arrive at a solution in respect of the unpaid interest. The company said it proposes to pay the interest along with the “applicable default interest” out of the proceeds of its cement business transaction, a binding memorandum of understanding it entered into with UltraTech Cement for selling a “significant” portion of its cement business.

In February, Jaiprakash Power Ventures had said it may once again seek board approval for a standstill agreement with bondholders to extend the deadline to repay money it owes them. FCCBs issued by the company in February 2010 were due for redemption on February 13, 2016, after the company negotiated a similar agreement in February, 2015. The company has entered into a standstill agreement till March 31, 2016 with certain holders of the bonds. Jaiprakash Associates holds 60.7 per cent in JP Power Ventures, according to the latest data from the stock exchanges.

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According to the company’s FY15 annual report, the five-year FCCBs of JP Associates, which carry a coupon rate of 5.75 per cent, were issued in 2012 and are due to be redeemed in September 2017, failing a conversion. The company issued 1.5 lakh FCCBs of $1,000 each for which semi-annual interest payments are scheduled for March and September.

These bonds are convertible at the option of bondholders into equity shares of face value of Rs 2 at the conversion price of Rs 77.50 per share. The share price of JP Associates is currently around Rs 7.89 after touching a lifetime low of Rs 6.45 last month. Since the issue, shares of JP Associates have lost more than 88 per cent of their value. The stock touched an all-time high of Rs 340 in January 2008.

FCCBs give the investor the option to convert the underlying bonds into equity shares at a predetermined price. If the stock price rises above this conversion price, investors stand to gain but otherwise they can redeem the bonds.

JP Associates is part of the Jaypee Group with business interests in power, cement, real estate and roads. It is also the holding company through which promoters have stakes in listed companies like Jaypee Infratech and Jaiprakash Power Ventures. Bloomberg data show that as of March 2015 the total consolidated debt stood at Rs 75,274 crore. In July last year, rating agency CARE had downgraded the credit rating of Rs 29,303 crore of long- and short-term debt. FE

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