Lenders Caught Off Guard: ICICI's Surprise Move Adds To Jaiprakash's Debt Woes

Caught off guard by ICICI Bank's move to utilize pledged Jaiprakash Associates (JAL) shares for debt settlement, other lenders within the 32-bank consortium have reached out to the lead lender, ICICI Bank. They are seeking an explanation regarding the bank's decision to settle a portion of the debt, especially considering that resolution discussions are ongoing among other consortium members.

With a total debt of Rs 29,272 crore, Jaiprakash Associates (JAL) is indebted to a group of 32 lenders. In 2017, the Reserve Bank of India (RBI) directed 26 defaulters, including JAL, to undergo the bankruptcy process. This led ICICI Bank to initiate an insolvency petition against JAL in 2018 before the Allahabad Bench of the National Company Law Tribunal. However, the admission of this petition is still pending, as per a report by the Economic Times.

An involved banker expressed astonishment at ICICI Bank's unexpected move, stating that all lenders have been grappling to recover from the account. The banker raised concerns, noting that ICICI, technically, cannot proceed with settlements without RBI approval in this insolvency initiated by the central bank.

JAL, the parent company, has consistently been putting efforts to address indebtedness through loan restructuring and asset sales, resorting to legal challenges to prevent the admission of its case to the NCLT.

Last week's update from JAL revealed outstanding loans totaling Rs 4,258 crore as of October. The company foresees a debt reduction of Rs 18,682 crore through the transfer of specific real estate to a special purpose vehicle, contingent upon NCLT approval.

With outstanding loans of Rs 3,000 crore, ICICI holds the position of the largest creditor, closely followed by IDBI Bank, with Rs 1,836 crore in loans.