LAKSHADWEEP’S JAYPEE BID HAD GAPS: LENDERS
Now that Lakshadweep, the highest bidder in the first round for Jaypee Infratech, is willing to renegotiate the amount it had put in, a question has arisen as to why it was rejected in the first place. Sources say it was turned down because the lenders felt it was uneven, having nothing for homebuyers and minority shareholders, and containing an extended timeline for completing projects. VEENAMANI writes
Now that Lakshadweep, the highest bidder in the first round for Jaypee Infratech, is willing to renegotiate the amount it had put in, a question has arisen as to why it was rejected in the first place.
Sources say it was turned down because the lenders felt it was uneven, having nothing for homebuyers and minority shareholders, and containing an extended timeline for completing projects.
Among the 12 cases on the
first list of the Reserve Bank of
India for resolution, Jaypee is unique in the sense it is consumer-facing.
Others are mostly B2B (business-to-business) companies.
Those involved in Jaypee Infratech’s resolution process say the lenders were irked because Lakshadweep’s revised bid was just ~2-3 billion higher than what it had offered earlier.
The final bid by Lakshadweep, a joint venture of Sudhir Valia-led Suraksha ARC and Dosti Realty, was ~70 billion. Further, sources say weep shadweep had asked for a waiver of statutory dues, which the lenders found was beyond their purview. Lakshadweep also said it would take up to five years to complete projects — a proposal that did not impress the committee of creditors (CoC). Almost 94 per cent of the lenders voted against the plan or did not vote. Only 6 per cent voted in favour of it. Meanwhile, Jaypee Associates offered its alternative plan and pleaded with the Supreme Court to direct the resolution professional had and asked the CoC for to a consider it.
While Jaypee’s plan was better in many respects, the lenders said its credentials weren’t good enough for them to consider it. Further, the amendments to the Insolvency and Bankruptcy Code bar promoters of defaulting companies from placing bids.
In its resolution plan, submitted to CoC and the resolution professional, Jaypee group Chairman Manoj Gaur had promised a marginal haircut to Jaypee Infratech’s lenders and minority shareholders, and possession of homes by 2021.
Lakshadweep has offered to give possession to the homebuyers by 2024.
The builder could need ~65 billion to construct the flats. The customers will pay ~40 billion, leaving a hole of ~25 billion.
Jaypee Infratech is investing ~500 million a month to complete them.
The Supreme Court has ordered that revised bids be called or the company goes for liquidation.
Homebuyers’ views
This case has a third dimension — those who have booked homes with Jaypee. While banks and operational creditors were familiar with the insolvency process, homebuyers were surprised when the company went for insolvency.
The Supreme Court’s interim order that revised bids should be invited has aroused hopes for homebuyers because the only option left is liquidation.
The law states a company that does not come up with a resolution plan will go for liquidation.
Homebuyers are not on a par with lenders so far as claims on insolvent companies are concerned. A committee of secretaries has recommended to the government that they be put on a level.