Bankruptcy of Nirav Modi’s Firestar Diamond in the U.S. draws early interest from potential buyers

Firestar Diamond and its affiliates had shown around $90 million in annual sales in the previous year. Its bankruptcy filing documents reveal some interesting tidbits including its corporate structure and the fact that it is talking with lenders for debtor-in-possession financing as it weighs its options for the future.

According to information revealed in court filings, potential buyers have expressed strong early interest in the bankrupt U.S. firm of Indian jeweler owned by Nirav Modi, an accused in India’s $2-billion bank fraud.

On February 26, Nirav Modi’s Firestar Diamond Inc filed for bankruptcy protection in the U.S following allegations that Modi and his uncle colluded with officials at India’s state-run Punjab National Bank to secure unauthorized loans between 2011 and 2017.

Nearly a month before the fraud came to light, Nirav Modi and his uncle Mehul Choksi, the owner of Gitanjali Gems Ltd left India and now claim innocence through letters and statements.

Indian authorities have seized/attached assets belonging to Modi and his companies.

Incidentally, Firestar has not been named in the Indian police complaint.

“Early expressions of interest in purchasing some or all of the debtors’ business operations have been strong,” said Firestar Diamond in a court filing on Wednesday.

Firestar Diamond has also informed its secured lenders that it was in discussions with lenders for debtor-in-possession financing as it weighs its options.

Firestar Diamond and its affiliates had shown an annual sales of nearly $90 million. Its clients include Macy’s, Costco Wholesale and JC Penney Co Inc.

Indian prime investigation agency, Central Bureau of Investigation, CBI, has arrested 13 people, including 7 from PNB and 6 from Modi’s and Choksi’s companies. Investigators have also seized a number of properties, including jewelry and luxury vehicles.

“Among the properties seized and businesses closed were factories in India which produced most of the fine jewelry merchandise sold by the debtors,” said Firestar in the filing.

Its filing further state, “The sudden loss of its supply chain and back office support has dramatically impacted the operations of the debtors in the short term.”

As per information provided in its filing in U.S. Bankruptcy Court of the Southern District of New York, in 2004 Firestar Diamond was created as a Delaware corporation under the name Jewelry Solutions International. In 2005, it changed its name to Next Diamond Inc. In 2007 it changed its name to Firestone Inc; in 2011 it took on its current name of Firestar Diamond.

Firestar Diamond is a wholly-owned subsidiary of the Firestar Group, which in turn is wholly owned by Synergies Corp. In turn, Synergies is wholly owned by Firestar Holdings Ltd, a Hong Kong corporation, which is wholly owned by Modi’s Indian company Firestar International Ltd.

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Categories: Creativity, Economy & Finance, Entrepreneurship, HR & Organization, Regulations & Legal, Strategy

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