BackJaiprakash Power lenders to invoke strategic debt revamp
Jaiprakash Power will be the second group company after Jaiprakash Associates Ltd, where lenders have recommended or discussed invoking SDR
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Mumbai: Jaiprakash Power Ventures Ltd, part of the debt-laden Jaypee Group, on Tuesday said its lenders have recommended the invocation of strategic debt restructuring (SDR).
The power producer will be the second group company after Jaiprakash Associates Ltd, where lenders have recommended or discussed invoking SDR.
“The lenders are planning on an SDR in the power arm because it allows them some time to manage a standard asset classification. A major sale is anyway happening in this company and an SDR will protect it from any penal charges or additional provisions," said a person close to the development, on conditions of anonymity as the discussions are confidential.
Jaiprakash Power said a joint lenders forum (JLF) meeting held to review the progress of its divestment plans and related matters, “has recommended for invocation of strategic debt restructuring (SDR) taking July 25, 2016, as reference date, subject to approval of lenders".
The board of the group in its meeting on 4 July had, in addition to the divestment plans, discussed matters including lenders invoking SDR.
Lenders to the group’s flagship company Jaiprakash Associates Ltd have threatened to invoke the provisions of the SDR that allows them to convert debt into equity and take control, Mint reported on 5 July.
According to Reserve Bank of India (RBI) guidelines on strategic debt restructuring, once lenders make a final decision on invoking SDR, they get 18 months before the majority stake in the company has to be sold to a new buyer. In this time, banks are allowed to continue with a standard asset classification, without making any additional provisions against the asset.
Jaypee Group has over the past two years been pushed by lenders to sell some of its assets, transfer ownership of land parcels and even hand over the keys to the group’s headquarters in Noida to pare debt. The deal to sell its cement assets to UltraTech Cement Ltd earlier this month was largely driven by the lenders of Jaiprakash Associates.
The group has also been selling assets to reduce stress in its power business. The firm on 18 July approved the sale of its Bina thermal power plant to JSW Energy Ltd for ₹ 2,700 crore, subject to mutually agreed adjustments. Last year, it sold two hydropower projects—Karcham Wangtoo and Baspa—to JSW Energy for about ₹ 9,200 crore.
As on 31 March, Jaiprakash Associates had a consolidated debt of ₹ 58,250 crore. The company owns 60.69% in Jaiprakash Power.
Separately, CARE Ratings on Monday downgraded the long-term bank facilities of Jaiprakash Power Ventures of ₹ 656.50 crore and ₹ 2,272.46 crore to ‘D’ or a default rating from ‘B’. The agency also reaffirmed its ‘D’ rating on long-term bank facilities of ₹ 12,241.53 crore.
Instruments with a ‘D’ rating are in default or are expected to be in default soon.
CARE Ratings said it has withdrawn the above mentioned bank facilities of ₹ 2,272.46 crore pertaining to the company’s Bina thermal power plant from its credit watch.
“The revision in the ratings of the bank facilities of Jaiprakash Power Ventures Ltd factors in delays in debt servicing by the company due to its weak liquidity," CARE Ratings said.
CARE said it has withdrawn the rating assigned to the bank facilities pertaining to Karcham Wangtoo and Baspa hydropower projects consequent to their transfer to a special purpose vehicle, which was sold to JSW Energy.
The ratings agency also has a ‘CARE D’ rating on Jaiprakash Associates. Jaiprakash Power currently operates the 400 megawatts (MW) Vishnuprayag hydro power project, and two thermal power projects—the 500MW Bina and the 1,320MW Nigrie plants.
Jaiprakash Power is also in the power transmission business through its 74% subsidiary, Jaypee Powergrid Ltd, which has set up a 214-km transmission line. Another subsidiary Prayagraj Power Generation Ltd has the 1,980MW thermal power project in Bara, Uttar Pradesh, of which 660MW capacity is operational and the rest is under implementation. Jaiprakash Power also commissioned a 2 million tonnes per annum cement grinding unit at Nigrie in June 2015.
Jaiprakash Power reported a standalone loss of ₹ 196.16 crore in the first quarter ended 30 June, against a ₹ 66.96 crore net profit a year ago. Standalone net sales in the first quarter fell 37.8% to ₹ 750.41 crore from ₹ 1,207.40 crore a year earlier.
Restricted operations of the Nigrie super thermal plant, higher costs at the Amelia coal mine and cheaper merchant power hurt the company. Lower demand depressed power generation at the Bina thermal plant, Jaiprakash Power said in a statement last week.
Jaiprakash Power’s shares rose 6.14% to ₹ 6.57 on BSE on Tuesday, while those of Jaiprakash Associates fell 3.04% to ₹ 12.11.
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