Indian jeweller's bankrupt US firm stirs buyer interest amid $2 bln fraud probe (updated)

Gitanjali Gems

01/03/2018 05:43

* Firestar Diamond filed for bankruptcy protection on Feb.
26
    * Discussing with lenders for debtor in possession financing
    * Bankruptcy after fraud allegations against owner Nirav
Modi

 (Adds details, quotes)
    By Krishna N. Das
    NEW DELHI, March 1 (Reuters) - Potential buyers have
expressed strong early interest in a bankrupt U.S. firm of
Indian jeweller Nirav Modi, who has been accused of involvement
in a $2-billion bank fraud in India, court filings show.
    Firestar Diamond Inc filed for bankruptcy protection on Feb.
26 in the United States, following accusations that other firms
led by Modi and his uncle colluded with officials of state-run
Punjab National Bank  PNBK.NS  to secure unauthorised loans
between 2011 and 2017.  urn:newsml:reuters.com:*:nL4N1QH25Y
    Modi and his uncle Mehul Choksi, owner of Gitanjali Gems Ltd
 GTGM.NS , left India in January before the fraud came to light,
but have said in letters and statements they are innocent.
    Indian investigators have, however, attached or seized
assets belonging to Modi and his companies. Firestar is not
named in the police complaint.
    "Early expressions of interest in purchasing some or all of
the debtors' business operations have been strong," Firestar
Diamond said in a court filing on Wednesday.
    It has also told secured lenders it was in discussions with
lenders for debtor-in-possession financing as it weighed
options.
    Firestar Diamond and its affiliates had annual sales of
around $90 million, with clients such as Costco Wholesale
 COST.O , Macy's  M.N  and JC Penney Co Inc  JCP.N , it said.
    India's Central Bureau of Investigation has arrested at
least 13 people, seven from the bank and six from Modi and
Choksi's companies. Investigators have also seized a number of
properties, including jewellery and luxury vehicles.
 urn:newsml:reuters.com:*:nL4N1QI5XV
    "Among the properties seized and businesses closed were
factories in India which produced most of the fine jewelry
merchandise sold by the debtors," Firestar said in the filing.  
  
    The Indian units had provided some back office and support
functions, it said, adding, "The sudden loss of its supply chain
and back office support has dramatically impacted the operations
of the debtors in the short term."
    Firestar Diamond was formed as a Delaware corporation in
2004, under the name Jewelry Solutions International. Its name
was changed to Next Diamond Inc in 2005 and again in 2007 to
Firestone Inc, before taking its current name in 2011.
    The company is a wholly-owned subsidiary of Firestar Group,
which in turn is wholly owned by Synergies Corp. Both are
Delaware incorporated.
    Synergies is then wholly owned by Firestar Holdings Ltd, a
Hong Kong corporation, which is then wholly owned by Modi's
Indian company Firestar International Ltd, according to the
filing in the United States Bankruptcy Court of the Southern
District of New York.

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
GRAPHIC- India's $1.77 billion bank fraud IMG    http://tmsnrt.rs/2C9xTKf
EXPLAINER-How PNB says it fell victim to India's biggest loan
fraud      ID:nL4N1QD4L8 
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Reporting by Krishna N. Das; Editing by Sanjeev Miglani and
Clarence Fernandez)
 ((Krishna.Das@tr.com; +91-98711-18314,  +91 11 4954 8026;
Reuters Messaging: Krishna.Das.thomsonreuters.com@reuters.net,
Twitter: https://twitter.com/krishnadas56))