Lenders give up on Jet revival, take it to NCLT

Pilots’ union too plans to move NCLT for non-payment of dues

MUMBAI: Lenders to Jet Airways (India) Ltd on Monday decided to start bankruptcy proceedings against the grounded airline, complicating hopes of a recovery.

The consortium of lenders, led by the State Bank of India (SBI), chose to refer Jet Airways to the National Company Law Tribunal (NCLT), the state-run bank said in a statement.

“A meeting of lenders was held today to consider the way forward in respect of Jet Airways. After due deliberations, lenders have decided to seek resolution under IBC (Insolvency and Bankruptcy Code, 2016) since only a conditional bid was received and requirement of the investor for Sebi (Securities and Exchange Board) exemptions and resolution of all creditors is possible under IBC,” the statement said.

“Lenders led by SBI have been taking efforts to find a resolution for Jet outside IBC but in view of the above, lenders have decided to seek a resolution within the IBC process,” the bank said.

A senior banker involved in the discussions said one or two parties have indicated their interest in Jet once it reaches the bankruptcy court although they did not offer any assurance. The banker requested anonymity.

Mint was the first to report on June 11 that London-based Hinduja Group had decided to halt negotiations to buy a stake in Jet Airways, while Etihad Airways of Abu Dhabi put on hold a plan to add more investments in the Mumbai-based airline.

“They cannot invest at ₹150 or ₹200 per share in this company. When they are putting in money, then they need to know if it is safe,” said the banker.

Last week, two operational creditors, Shaman Wheels Pvt. Ltd and Gaggar Enterprises Pvt. Ltd, filed separate insolvency pleas against Jet Airways at NCLT, Mumbai, for recovery of their dues.

“The onus of settlement cannot be on lenders. We can settle our dues. But we cannot settle operational creditors. So, one more option was Section 230. For that, if everybody agrees, i.e, 75% technically agrees, you can file a scheme for arrangement. But the option of dissenting lenders to take the company to NCLT would still remain,” said the banker cited earlier.

The pilots’ union of Jet Airways, National Aviator’s Guild, also plans to file a plea against the grounded airline at NCLT for non-payment of salaries and not providing a provision for gratuity payment to its staff.

Aviation analysts said it is unlikely that the lenders will be able to recover a substantial portion of their dues by referring the airline to NCLT.

“Jet doesn’t have many assets left as most of their aircraft were inducted on a sale and leaseback mechanism,” said an analyst at a foreign brokerage, requesting anonymity. “The properties owned by the airline are also mortgaged as security for loans.”

Jet Airways owns about 13 aircraft, including 10 Boeing 777s and three Boeing 737 aircraft, most of which are mortgaged to financers, said Mark Martin, founder and chief executive of aviation consultancy firm Martin Consulting. “Since these planes are old, lenders can raise at least $40-50 million per aircraft by selling the Boeing 777 aircraft owned by the airline,” Martin said.

The Export-Import (Exim) Bank of the US could, however, initiate proceedings to take back at least six planes it financed for Jet Airways. This could worsen the situation for the Indian lenders to recover their loans.

“At present, Exim has not taken steps regarding deregistering of the six Boeing aircraft. Exim continues to seek a full recovery of the remaining debt owed,” a spokesperson said.

Queries sent to Jet Airways seeking comments on the decision didn’t elicit a response till press time.

A second banker aware of the discussions at Monday’s meeting said none of the bids received for Jet worked out owing to the range of haircuts sought by bidders, among other issues.

Shayan Ghosh contributed to this story.