Allahabad Bank, UCO Bank sell Jai Balaji loans to Edelweiss ARC

MUMBAI: State-run lenders UCO Bank and Allahabad Bank have sold their entire loan exposure to Jai Balaji Industries Ltd (JBIL) to Edelweiss Asset Reconstruction Co ahead of a deadline to begin bankruptcy proceedings against the debtladen steelmaker, two bankers familiar with the matter said.

Jai Balaji is one of 29 companies in a list prepared by the Reserve Bank of India for resolution before December 13. If the resolution does not happen by then, lenders must initiate insolvency proceedings at the National Company Law Tribunal (NCLT).

Jai Balaji has around ₹3,600 crore of debt, 40% of which to these two banks.

“The lenders have sold it a discount by taking a 63% haircut. JBIL has been a non-performing asset (NPA) for nearly three years and banks have made 100% provisioning,” said one of the bankers cited above, on condition of anonymity.

NPAS are loans that do not yield returns.

As per the terms of the loan sale, Edelweiss ARC will give 15% of the net asset value as upfront cash, and issue security receipts for the rest. The purchase of these loans will make Edelweiss ARC one of the largest creditors to the company.

State Bank of India, one of the lenders to the company, is exploring the option of referring Jai Balaji to NCLT, said a third banker aware of the matter.

Jai Balaji had accumulated losses of ₹1,850 crore till March 31, 2017.