Three companies owned by scandal-tarred Indian billionaire Nirav Modi—A. Jaffe, Firestar Diamond, and Fantasy Inc.—hope that Chapter 11 will help them find a buyer.

The three companies filed for Chapter 11 on Feb. 26 in New York bankruptcy court.

According to a first-day motion covering all three companies, the Chapter 11 filing was precipitated by reports out of India alleging that Modi had received approximately $1 billion in unauthorized loans from Punjab National Bank. Modi’s lawyer has denied the allegations.

“Authorities in India began attaching, seizing, and/or freezing assets and properties belonging to Modi,” said the affidavit from president and director Mihir Bhansali. “Among the properties seized and businesses closed were factories in India which produced most of the fine jewelry merchandise sold by [the companies]. These entities in India also provided certain back-office functions.

“The supply chain disruptions and negative publicity have dramatically impaired the [companies’] business operations in the short term and have created a great deal of uncertainty in the market,” the affidavit continued. “The Debtors have filed these Chapter 11 cases in an effort to preserve the going concern value of the business and effectuate a sale or other transaction.”

Bhansali’s statement also spells out the company’s sometimes-complex ownership structure.

Firestar Diamond is a wholly-owned subsidiary of Delaware-based Firestar Group, which is a wholly-owned subsidiary of Hong Kong–based Synergies Inc., which is a wholly-owned subsidiary of Firestar International Ltd. (FIL), India corporation. Nirav Modi is majority shareholder of FIL.

Fantasy Inc. is owned by Firestar Diamond. The two companies do $90 million worth of sales to high-volume customers like department stores.

Approximately 95 percent of the equity of A. Jaffe Inc. is owned by Synergies Inc., the Hong Kong company, while 5 percent is owned by founder Samuel Sandberg. Its sales have been growing in double digits for the last three years and are projected to hit $23 million in fiscal 2018.

This week, the companies appointed Mark Samson, managing director with restructuring company Getzler Henrich & Associates, as chief restructuring officer.

(Photo courtesy of A. Jaffe)

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