A Jet Airways (India) Ltd. aircraft prepares to land at Chhatrapati Shivaji International Airport in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

SBI Begins To Look For Plan-B For Jet Airways

State Bank of India will start working on an alternative resolution plan for Jet Airways (India) Ltd. after talks with Etihad Airways PJSC remained inconclusive, two people aware of the development told BloombergQuint.

India’s largest lender, in a meeting with the lending consortium on Tuesday, said Etihad Airways raised several concerns regarding the draft resolution plan that bankers had prepared earlier this month, according to the persons quoted above said. This has now forced SBI to consider other options, including searching for new investors for Jet Airways, they said requesting anonymity.

The resolution plan involved equity infusion by existing shareholders of Jet Airways, conversion of a portion of the airline’s Rs 10,000-crore debt into equity for lenders and a long-term turnaround plan for the operations of the company.

Etihad Airways Chief Executive Officer Tony Doughlas, at a meeting with SBI Chairman Rajnish Kumar on Monday, raised concerns regarding the “right of recompense” sought by the banking consortium and promoter Naresh Goyal’s stake in Jet Airways after the resolution plan is implemented, the people quoted above said. Without the involvement of the Abu Dhabi-based airline, the resolution plan could potentially fall apart, they said.

The process for finalising a restructuring plan for Jet Airways has nearly completed 90 days. On March 31, banks will have to classify Jet Airways as a non-performing asset, according to existing income recognition guidelines.

According to the Reserve Bank of India’s restructuring guidelines released in February 2018, banks have 180 days from the first date of default to resolve a case. If they are unable to do so, they would be forced to admit the company under the Insolvency and Bankruptcy Code. On Jan. 1, Jet Airways informed the stock exchanges that it had defaulted on its debt repayment to the lending consortium.

Also read: Banks May Offer Jet Airways Fresh Funds If Major Shareholder Pledge Shares