Bank of America buys its biggest distressed asset in India

The decision to purchase soured loans of Jayaswal Neco Industries Ltd, that makes cast iron pipes, adds to a growing trend of foreign investors exploring the India's massive pile of bad debt.

Vehicles are reflected in the window of a Bank of America Corp. branch in Chicago, Illinois, US | Christopher Dilts/Bloomberg

Mumbai: Bank of America Corp. has bought its biggest distressed asset in India, adding to a growing trend of foreign investors diving deeper into the country’s massive pile of bad debt.

A group of investors led by the U.S. bank have paid Rs 33 billion ($479 million) for soured loans of a beleaguered Indian maker of cast iron pipes, according to people familiar with the matter.

The group, which includes local bad debt buyer Assets Care & Reconstruction Enterprise, bought distressed loans of Jayaswal Neco Industries Ltd., with a face value of 47 billion rupees, said the people, asking not to be identified as they aren’t authorized to speak publicly. Lenders led by State Bank of India sold the debt, taking a haircut of 30 percent on the all-cash deal, the people said.

As India battles with the worst non-performing loan ratio among the world’s major economies, foreign investors are vying for a piece of the $190 billion pile of soured and stressed debt. Steelmakers have struggled to repay debt in recent years, with Essar Steel India Ltd. among one of the most high-profile cases. Jayaswal Neco became stressed as a slump in demand for its products eroded its debt repayment capability.

Bank of America has been upping the ante on its investments in India. Its purchases of distressed loans in India include those of telecom tower firm GTL Infrastructure Ltd. and SevenHills Hospital. It was also the sole bidder for State Bank of India’s $2.2 billion Essar Steel loan, which was scrapped.

Representatives for BofA, Assets Care & Reconstruction and SBI couldn’t immediately respond to an email seeking comment on the loan purchases.

Key Background

• Foreign investors that have been active in India include Deutsche Bank AG, which is setting up a unit in India to buy and reorganize soured debt.
• Other overseas investors including Blackstone Group LP and SSG Capital Management Ltd. have bought into existing asset reconstruction companies.
• More than 29 asset reconstruction companies have been set up in India under a 2002 law, passed to help lenders reorganize non-performing assets, RBI data show.