Allahabad, UCO bank sell loan exposure in Jai Balaji to Edelweiss

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 Company ahead of a deadline to begin bankruptcy proceedings against the debt-laden 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 a total debt of around ₹3,600 crore, out of which it owes 40% to these two banks.

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

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.