Bank of America seals distressed asset deal in India

Bank of America has sealed its biggest deal in India′s stressed assets segment by buying bad loans of beleaguered Jayaswal Neco Industries Ltd. A group of investors led by the US bank have paid around $476 million (Rs 3,300 crore) to acquire 88 per cent of Chennai-based Jayaswal Neco's debt. The remaining 12 per cent of bad loans will also be bought within the next one month $706 million (Rs 4,800 crore).

The investment has largely been made via domestic asset reconstruction company Assets Care & Reconstruction Enterprise (ACRE), which counts special situations investment firm SSG Capital Management and private-sector lender Axis Bank among its major shareholders.

Bank of America will pay ACRE a commission to facilitate the deal as Reserve Bank of India regulations allow only asset reconstruction firms and domestic financial institutions to buy loans or debt from banks.

The bad loans, in this case, were purchased from lenders led by State Bank of India (SBI), which took a haircut of about 30 per cent on the cash deal.

With this acquisition, Bank of America is diving deeper into the growing distressed asset pile in India. So far, the US bank's investments in the segment include SevenHills Hospital and telecom tower firm GTL Infrastructure Ltd.