SBI files insolvency plea against Jet Airways at NCLT; airline may get renewed interest

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State Bank of India approached the Mumbai bench of National Company Law Tribunal on Tuesday against Jet Airways, and its petition may be heard on Wednesday.

The rest of the banks, with exposure to Jet Airways’ debt of over Rs 8,000 crore, are also expected to join the petition.

Confirming the development, a senior executive said, “We are hopeful of a resolution under the Insolvency and Bankruptcy Code, rather than liquidation.”

He added that Etihad Airways, which had put in a conditional bid, wanted a waiver of an open offer, which was not possible due to SEBI norms. “This may be possible under IBC. Now that there is clarity in the process, we may see renewed investor interest,” he added.

While not commenting directly on the IBC process, the Abu Dhabi-based airline said in a response to Moneycontrol’s query:

“Etihad Airways has worked consistently to find a solution which would enable Jet Airways to be reactivated as a viable entity. We will continue to constructively evaluate participation in potential solutions.”

Renewed interest

It is not just from Eithad Airways, but there could be interest from others too.

The Sanjay Viswanathan-led AdiGro Aviation said it had renewed its interest in Jet Airways, after walking away “as lenders and Etihad Airways couldn’t reach positive conclusion regarding way forward.”

Viswanathan said that the NCLT process would help suitors cherry pick Jet Airways’ assets (routes, slots and aircraft). But, he pointed out that the process might take another eight months.

“Jet Airways may even lose its license, and thus a new owner will need another six months to fly acquired aircraft as they need to be certified for airworthiness and re-registered with DGCA. But if the acquirer already has a license, then it will have the advantage to cherry pick,” he said.

Haircut on debt

The interest will be encouraging for Jet Airways’ stakeholders as there were apprehensions on taking the airline to NCLT, and if it would help revive the airline.

Sources told Moneycontrol that conditions might actually be more conducive to get interest from suitors.

“Banks were reluctant to give haircuts as demanded by Etihad Airways and Hinduja Group. But now in the insolvency courts, the bids will decide how much haircut the banks will have to take,” said a senior official from the industry.

Jet Airways has debts of over Rs 8,500 crore, and sources earlier told Moneycontrol that both Etihad Airways and the Hinduja Group had asked banks to take a haircut of up to 85 percent.

“Banks were not ready to take such a big dent,” said the executive cited above.

While Etihad Airways was the only shortlisted bidder to put in a bid, the Hinduja Group later made its interest in Jet Airways public, and the two were in talks for a possible deal.

But, in a statement on Monday, Jet Airways lenders said that they had received just one conditional bid, and that the investor had asked for SEBI exemption. This, and the resolution of all creditors, is possible under Insolvency and Bankrupcy Code, they said.

Etihad Airways, say sources, also asked exemption from an offer, as stipulated by SEBI, if its stake went over 25 percent. At present, it has 24 percent stake in Jet Airways.

“The insolvency process will also help repaying creditors in a phased manner and over a course of time,” said another executive from the industry.

The spokesperson of the Hinduja Group could not be reached for response on its interest in the insolvency process.

Meanwhile, Jet Airways said in a statement to the exchanges on Tuesday that Ashok Chawla and Sharad Sharma had resigned as independent directors.

“…. in view of the Board continuing to be in non-compliance with the provisions of the Companies Act, no additional directors being appointed and the process of bank led resolution plan not moving around,” the company said.