JP Associates receives shareholders nod to convert debt into equity

Debt-laden Jaiprakash Associates Ltd (JAL) on Wednesday said it has received shareholders’ approval to allow conversion of its debt to equity in the company. The approval will help pave the way for lenders to step in and pick up stakes in the company.

In a statement to the BSE on Wednesday, Jaiprakash Associates said its shareholders had at the annual general meeting approved converting loans, debentures or other borrowings of the company into equity shares or securities in the company. Around 88.06 per cent of the votes cast by its shareholders, the company said in the statement, were in favour of the resolution.

As of March 31, Jaiprakash Associates had consolidated debt of ~58,250 crore. The approval comes on the back of a joint lenders forum’s decision to invoke strategic debt restructuring (SDR) for the company.

“Taking note of the decision of the joint lenders forum of company lenders on the invocation of strategic debt restructuring (SDR), subject to approval of lenders, the board has constituted a committee of directors to evaluate various options necessitating financial restructuring,” the company said in a statement sent to the BSE on July 4.

The Jaypee group has been struggling to meet its debt servicing and payment obligations since several quarters due to deteriorating financial health. Under pressure, the group has sold several cement and power assets since 2013 to reduce its debt burden.

In one of its biggest deals, the company agreed to sell 21.20 million tonnes of its cement assets to UltraTech Cement Ltd for ~16,189 crore in July this year. Under the SDR plan, lenders can convert debt exposure in a company into an equity stake and then look for a new buyer for that stake, which could also lead to the promoter losing ownership of the company.

Jaiprakash Associates Ltd is the group holding company for two other subsidiaries — Jaiprakash Power Ventures Ltd and Jaypee Infratech Ltd. Jaiprakash Associates holds about 61 per cent in the power subsidiary and 71 per cent in the infrastructure subsidiary. The promoter holding in Jaiprakash Associates as on June 2016 was at 39.38 per cent.