Jaypee Healthcare Plunges into Insolvency Amid Asset Sell-Off

A competitive scramble is underway, with Fortis Healthcare, Apollo Hospitals, Medanta, and Max Healthcare among the contenders eyeing Jaypee Healthcare.

In a decisive move, the Allahabad bench of the National Company Law Tribunal (NCLT) has ordered Jaypee Healthcare to admit corporate insolvency and resolution process following a petition by JC Flowers Asset Reconstruction Company.

Reportedly, a competitive scramble is underway, with Fortis Healthcare, Apollo Hospitals, Medanta, and Max Healthcare among the contenders eyeing Jaypee Healthcare.

The healthcare company stands as the final significant asset of the embattled Jaiprakash Group to fall into bankruptcy.

The tribunal's written order remains pending, yet the consequences are immediate.

Days back, Manoj Gaur's Jaiprakash Associates was similarly drawn into insolvency proceedings, and a Suraksha Realty-led consortium has already commandeered Gaur’s other venture, Jaypee Infratech, under the Insolvency and Bankruptcy Code.

What Led to the Bankruptcy?

Founded by Jai Prakash Gaur, Jaypee Healthcare is a multi-specialty tertiary care hospital. It offers treatment across various specialties, including knee replacement, spine, kidney transplant, liver transplant, and heart surgery.

The financial crisis began to unfold in March 2023 when JC Flowers Asset Reconstruction Company (ARC), having acquired loans from Yes Bank, invoked a share pledge. This maneuver made JC Flowers ARC a 63.6% stakeholder in Jaypee Healthcare, with Jaypee Infratech holding the remaining shares.

Yes Bank initially filed a petition to admit Jaypee Healthcare into insolvency, claiming dues amounting to INR 189.4 Cr at the Allahabad bench of the National Company Law Tribunal (NCLT). This legal action was prompted by Jaypee Healthcare’s inability to meet its financial obligations, which were part of a broader financial crisis affecting its parent company, Jaiprakash Associates Ltd (JAL).

In a recent attempt to resolve the issue, Suraksha, holding a 36% equity stake in the hospital, approached the NCLT, indicating that it was negotiating with Jaypee Healthcare’s lenders for an out-of-court debt settlement. However, these negotiations did not materialize successfully.

The insolvency petition by Yes Bank was a significant blow to Jaypee Healthcare, which had been struggling with its liabilities.

NCLT’s Final Call

The hospital's lenders include JC Flowers ARC, Bank of Baroda, Exim Bank, Punjab National Bank, and the Asset Reconstruction Company of India (Arcil), with a disclosed debt of approximately INR 1,000 Cr, per Care Ratings.

The tribunal has appointed Bhuvan Madan, supported by PwC, as the interim resolution professional, while lenders have engaged Shardul Amarchand Mangaldas as their advisor.

Hospital chains interested in acquiring Jaypee Healthcare have approached both the ARC and Suraksha Realty, which acquired Jaypee Infratech, according to insiders.

The tribunal’s decision was influenced by NBCC's plea suggesting an amicable debt solution between the successful bidder of Jaypee Infratech and the hospital’s lenders.

Moreover, NBCC was also vying for Jaypee Infratech, Jaypee Healthcare's parent company.

2024's Bankruptcy Buzz

Last month, US-based healthcare provider Steward Health Care filed for bankruptcy, citing ongoing financial struggles amidst a turbulent healthcare landscape.

The filing, submitted in the Southern District of Texas, marks a pivotal moment for the largest physician-owned hospital operator in the United States, grappling with mounting debt and reimbursement issues.

Likewise, in a bid to address its staggering $9 billion debt burden, Steward Health initiated the sale of all 31 of its hospitals across the United States.

The decision was announced during a court hearing in Houston, where Steward's attorneys disclosed the company's dire financial situation and outlined plans for restructuring under Chapter 11 bankruptcy protection.

Steward's bankruptcy filing comes in the wake of mounting financial pressures, exacerbated by the closure of a Massachusetts hospital earlier this year.