Creditors ask Jet Airways to explain liquidity situation

Mumbai:domestic and foreign lenders of Jet Airways (India) Ltd have asked the company to explain its liquidity situation, just a few days after the airline defaulted on a scheduled loan repayment. The lenders will now meet the airline executives, along with various vendors, and help Jet Airways renegotiate contracts and revive its poor cash flow position in the coming days, according to two people familiar with the discussions.

A consortium of the airline’s domestic lenders, led by State Bank of India (SBI), and vendors, including lessors, and those providing engineering, spare parts, credit card and airport services, will meet officials of the beleaguered-airline on January 8, said a senior banker with knowledge of the matter.

Jet’s foreign lenders are expected to meet its executives next week, said a second person with knowledge of the matter.

The airline faces the daunting task of turning around its lossmaking operations and raising money from the market to fund its operations and service debt.

“Lenders want to ensure that the outstanding dues of lessors and vendors are sorted out to avoid any cancellation of lease contracts,” said the senior banker mentioned above, who did not want to be named.

“Jet Airways’ lenders, along with SBI Caps, are working on a restructuring package that includes conversion of debt into equity, additional loan facility, and equity infusion by promoters,” the banker said.

To this effect, SBI, Jet Airways’ largest lender, appointed EY to conduct a forensic audit into Jet Airways books, from April 1, 2014 to March 31, 2018. The process is underway. The audit carried out by EY could also determine if the Sbi-led consortium of banks will make further funds available to Jet Airways, which has the guarantee of its partner Etihad Airways to raise up to $150 million.

Any further restructuring steps taken by bankers may be conditioned to the promoter diluting his stake, said an analyst tracking the sector for a foreign brokerage. Bankers also have the option to convert Jet Airways’ debt into equity, or take the airline to the National Company Law Tribunal if its current promoters don’t resolve the situation at hand quickly.

The lenders, led by SBI, could also ask Jet Airways’ vendors to give the airline some concessions or allow the airline defer certain payments, to help it turn its operations around on the back of lower oil prices, the analyst said.

A Jet spokesperson said: “We remain optimistic about outcomes with regard to discussions with lenders. Talks are progressing well. We hope to reach a positive resolution at the earliest.”