Jet Airways’ Lenders To Meet On Jan. 16 To Flesh Out Restructuring Plan

Lenders to Jet Airways (India) Ltd., led by State Bank of India, will meet on Wednesday to discuss a resolution plan prepared by the lead lender, two bankers in the know confirmed.

The plan includes selling further equity to Etihad Airways PJSC and reducing promoter Naresh Goyal’s stake from the current 51 percent to about 22 percent, said one of the bankers quoted above. Removing Goyal from the air carrier’s board and allowing his son Vihaan Goyal to take over his seat will also be part of the discussions. The basics of the plan have been circulated to all the lenders involved and it will be further discussed at the meeting, the two bankers quoted above said.

The lenders are looking to close discussions soon so that a resolution plan for the account is in place before March 2019. India’s second largest air carrier owes Rs 8,000 crore to its lenders and defaulted on dues last month.

The plan, if approved, will allow lenders to extend fresh credit to the airline. At the last meeting between lenders and Jet Airways’ management earlier this month, the airline had requested for Rs 1,500 crore in working capital loans to repay vendors. However, lenders were not inclined to extend any fresh loans till a restructuring plan was put in place.

The paucity of funds has meant that Jet Airways has not paid its employees and vendors over the last few months.

“In line with its policy, Jet Airways does not comment on speculation,” a spokesperson for Jet Airways said in an email response. Arijit Basu, managing director, SBI said that the bank does not comment on any company specific information.

On Jan. 2, the air carrier informed stock exchanges that it had defaulted on interest and principal installments due on Dec. 31. Lenders met immediately thereafter and started working on a resolution plan. SBI, being the lead lender, had sought a forensic audit of the company to ensure that the books were clean. According to one of the bankers quoted above, there has been no adverse finding via the audit so far.

The lenders had asked promoter Goyal to submit a resolution plan before the account hits the 30-day overdue mark. According to Reserve Bank of India rules, an account which has been in default for more than 30 days is classified under the special mention account-1 (SMA-1) category. This would require lenders to swing into action and take resolution into their own hands.

The restructuring guidelines issued by RBI in February last year mandate that banks implement a resolution plan within 180 days of the first default. If they are unable to do so, the company must be referred to the National Company Law Tribunal for insolvency proceedings.