BQ Exclusive: NBCC Proposes Banks Take Over Unsold Homes In Jaypee Infratech Case
In its bid to take over insolvent infrastructure and realty company Jaypee Infratech Ltd., the government-owned NBCC Ltd. has offered to sell unsold homes to the secured financial creditors of Jaypee’s Committee of Creditors.
According to the revised resolution plan submitted by NBCC on Wednesday, the builder has stated that if it is allowed to take over Jaypee Infratech, it reserves the right to sell the unsold inventory to financial creditors at a price decided by them. The lenders can then sell these homes in the open market, thereby making an upside and recovering a portion of their investment into the project. BloombergQuint has reviewed a copy of the resolution plan.
The NBCC Resolution Plan
There are around 2,200 unsold homes under various projects being built by Jaypee Infratech, according to the resolution plan. The value of these homes, based on the prevailing market rate amounts to a little over Rs 1,700 crore.
If the lenders agree to take over this unsold inventory, they will have to pay half the estimated value within 30 days of signing the agreement, about 25 percent within a year and the balance after the physical completion of the construction work. NBCC has also offered to thereafter market these unsold houses on behalf of the lenders.
A creditor involved in the process said on the condition of anonymity that secured financial creditors may not be inclined to get into the business of selling houses. The lenders will decide on whether they need to negotiate better terms with the bidder during the next CoC meeting on Friday.
As part of its resolution plan, NBCC has also offered lenders to pay Rs 500 crore in cash upfront. The plan proposes that the 858 acres of land parcels owned by Jaypee Infratech be transferred to the financial creditors. The value assigned to these land parcels stands at around Rs 5,000 crore. NBCC has stated in the resolution plan that it will enter into an agreement with the lenders to sell these land parcels for them for a commission.
The 165-kilometre-long Yamuna Expressway, a functional asset owned by Jaypee Infratech, is proposed to be transferred to a special purpose vehicle owned by the company, along with Rs 1,500-crore debt. The plan proposes lenders settle this debt by securitising toll collections and other earnings from the expressway.
For homebuyers awaiting the completion of their homes by Jaypee Infratech, NBCC has promised to deliver apartments in a phased manner between 2021 and 2023. It has also said that 25 percent of the penalty due to homebuyers would be paid, on the condition that the bidder gets access to the Rs 750-crore deposit made by Jaiprakash Associates Ltd. Last year, the Supreme Court had ordered that Jaiprakash Associates must deposit Rs 2,000 crore to ensure payouts to all homebuyers. However, the company was able to deposit only Rs 750 crore.
Jaiprakash Associates owns a 61 percent stake in Jaypee Infratech.
The Suraksha ARC Resolution Plan
The Jaypee Infratech CoC will also consider a revised bid submitted by the other bidder, Suraksha Asset Reconstruction Company Ltd. According to two people involved in the process but speaking on the condition of anonymity, Suraksha ARC has offered Rs 50 crore cash upfront and is willing to complete the pending construction work in residential properties and deliver homes to the homebuyers.
Jaypee Infratech was one of the 12 large cases identified by the Reserve Bank of India in June 2017 for immediate insolvency resolution. But no bidder was finalised within the 270-day timeline set out for insolvency resolution prompting the resolution professional to file a motion for liquidating the company. In August 2018, the Supreme Court intervened in the matter and ordered that insolvency proceedings start afresh and homebuyers be included in the CoC as financial creditors.
Some homebuyers booked their flats over a decade ago but have yet to get possession even as they continue to service the home loans they raised to pay for the property. If Jaypee Infratech were to go under liquidation, it could impact their financial standing considerably.
Jaypee Infratech owes financial creditors nearly Rs 9,800 crore, while homebuyers are owed more than Rs 13,000 crore for homes they have paid for but have not been delivered. Their inclusion in the CoC gives them the majority vote at 58 percent.
One group of homebuyers, called 9A, has 1,000 members and is inclined to vote in favour of the NBCC plan.
“Homebuyers have waited for more than 10 years for their flats and have already lost almost two years in the insolvency process. We would not like to see the company go under liquidation again. The delivery schedule proposed by NBCC is longer than what Suraksha is proposing. Still we are willing to support NBCC’s bid since it is a government-owned company and there will be some accountability there. We will be organising homebuyers and seeking IDBI Bank’s support so that we vote in a unidirectional manner to achieve resolution for JIL,” said Abhishek Dubey, a Jaypee homebuyer and lawyer who represents 9A.