Andy Mukherjee is a Bloomberg Gadfly columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

Jaiprakash Associates may no longer be the toast of India's infrastructure ambitions, but it isn't exactly toast in the international debt market.

It's somewhat surprising for a conglomerate that missed an interest payment this week to still have its outstanding bonds trade at about 70 cents on the dollar, especially when about $19 billion of Asian U.S. currency-denominated debt, including from issuers such as Indonesia's Bumi Resources and Singapore's Noble Group, is selling for much less -- in some cases just 16 cents on the dollar.

What might be helping Jaiprakash is the $2.4 billion sale of its cement business to billionaire Kumar Mangalam Birla. Creditors will hope to get repaid when the deal concludes. And when is that likely to be? Probably not before next year, by which time the Indian legislature will hopefully have passed a bill allowing companies such as Jaiprakash to pass on control of captive coal mines to new owners.  

The promise of deleveraging via asset sales is keeping the country's 17 most indebted companies -- India's ``House of Debt," as Credit Suisse calls them -- from crumbling.

The bloated balance sheets need to shrink, and fast. But a modern bankruptcy code is still pending legislation, and voluntary asset sales are frustratingly subject to hurdles and delays. While Jaiprakash's deal is at the mercy of a change in the law, mobile operator Reliance Communications' plan to unload its wireless tower business to a buyout group that includes TPG Capital is mired in haggling over valuation. If news reports are to be believed, deal-making has reached frenzied proportions: Another Anil Ambani-controlled company, Reliance Infrastructure, is trying to sell its road assets to Canada's pension fund, while  GVK  Power & Infrastructure is reportedly hawking its controlling stakes in Mumbai and Bengaluru airports to JSW Group.

Deleveraging Hopes
Jaiprakash shares collapse, but the Indian company's dollar bonds still trade at 70 cents to dollar
Source: Bloomberg

Still, there's a huge gap between news headlines and actual deleveraging. The clear test of the latter would be a reduction in the debt burden. But that's nowhere in sight. According to a note last month by Credit Suisse's Mumbai-based analysts, the combined debt of the 17 most highly leveraged Indian companies is now more than 8 times Ebitda, compared with 5.5 times a year earlier. For Jaiprakash Associates, the burden is almost 80 times. 

House of Debt
Debt-to-Ebitda of some of the most vulnerable Indian companies
Source: Credit Suisse, February 2016

The blame for the dawdling on debt-shedding must go to banks. They have lent most of the money to these companies, with bond markets playing second fiddle. It's the lenders that have to wield the stick and get borrowers to cough up assets and raise cash. However, most Indian banks, as Credit Suisse notes, are treating their exposure to the House of Debt as standard assets. Until this pretense comes to an end, companies don't have a powerful enough incentive to hit the asset-sale treadmill and get fitter. Creditors, meanwhile, are left with little option except to live in hope of getting their money back -- someday.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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