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Tuesday, August 03, 2021

Explained: Creditors choose Suraksha for Jaypee resolution; what happens now?

Suraksha Asset Reconstruction Ltd has emerged as the successful bidder for debt-ridden Jaypee Infratech. What is its resolution plan for Jaypee? What happens here onward?

Written by Karunjit Singh , Edited by Explained Desk | New Delhi |
June 24, 2021 3:06:28 pm
Jaypee's Wish Town project in Noida. The company has failed to deliver 20,000 homes to buyers for over a decade. (Express Photo: Gajendra Yadav, File)

Suraksha Asset Reconstruction Ltd (Suraksha ARC) has emerged as the successful bidder for debt-ridden Jaypee Infratech after narrowly beating state-owned NBCC in voting by the Committee of Creditors of Jaypee Infratech.

Suraksha ARC’s resolution plan reportedly received the support of 98.66 per cent of the financial creditors while NBCC’s resolution plan received approval from 98.54 per cent of financial creditors.

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What is the background of this decision by the Committee of Creditors, and what are its implications?

What is Jaypee Infratech’s debt burden like?

Jaypee Infratech has total debt obligations of over Rs 22,000 crore, including 20,000 homes that the company has failed to deliver to buyers for over a decade.

The company, which manages the Yamuna Expressway, was one of the big 12 defaulters to be referred to the Insolvency and Bankruptcy Code (IBC) for resolution by the Reserve Bank of India.

What is Suraksha ARC’s resolution plan for Jaypee Infratech?

Suraksha ARC’s resolution plan is set to complete the construction of unfinished housing units within 42 months, and to transfer 2,651 acres of land held by the company to lenders to settle their debt — besides infusing Rs 175 crore as equity into the company.

Suraksha ARC is also set to avail of loans of Rs 3,000 crore to complete the construction of unfinished residential units.

Under the plan, Suraksha ARC proposes to retain Yamuna Expressway within Jaypee Infratech, as opposed to the plan by NBCC, which had planned to offer 82 per cent of the rights in the Yamuna Expressway to lenders after hiving it off into a special purpose vehicle.

How did the voting proceed?

ICICI Bank was the only lender to vote against the bids by both resolution applicants. But a vote by SREI infrastructure Finance approving Suraksha ARC’s plan and rejecting the NBCC plan played the key role in giving the edge to Suraksha ARC’s bid.

This concluded the fourth round of bidding for Jaypee Infratech after the Supreme Court set aside the approval of a bid by NBCC by the Committee of Creditors, as it did not comply with the IBC.

Buyers protest against Jaypee in Noida. (Express Photo: Gajendra Yadav, File)

How has the process progressed thus far?

The JSW, Vedanta, and Adani Groups had also shown interest in the resolution of Jaypee Infratech, but dropped out due to delays in the resolution process.

Insolvency proceedings against Jaypee Infratech started in 2017, and faced a number of challenges — including attempts by Jaypee Infratech’s promoter Jaiprakash Associates Limited to withdraw the company from insolvency proceedings.

The case also led to the government amending the Insolvency and Bankruptcy Code in 2019 to allow the majority decision of homebuyers to be counted as a unanimous block decision in the proceedings of the Committee of Creditors.

What happens here onward?

Suraksha ARC’s approved resolution plan will now be placed before the National Company Law Tribunal (NCLT) for approval. The approval by the Committee of Creditors may also be challenged by NBCC before the NCLT and the appellate tribunal.

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