Jet Airways may face liquidation in absence of strong bidders

Updated: August 20, 2019 7:09:56 AM

Jet Airways has been grounded since April 17, when lenders refused to extend emergency funding to carry out operations. Lenders to Jet Airways tried to sell the airline in April.

Jet Airways, liquidation, Jet Airways crisis,  Etihad Airways, industry newsHaving failed to make the sale, the State Bank of India had in June moved the insolvency tribunal.

By Anwesha Ganguly
& Shritama Bose

The resolution of Jet Airways appears to have reached the end of the road, with Etihad Airways bowing out of the process. Liquidation may be the next course of action, sources close to the development told FE. The committee of creditors (CoC) for Jet Airways is likely to meet this week to finalise the way forward.

Jet Airways has been grounded since April 17, when lenders refused to extend emergency funding to carry out operations. Lenders to Jet Airways tried to sell the airline in April. At the time, none of the shortlisted potential buyers evinced interest in the airline except Etihad Airways, a strategic partner to Jet, which had put forth a conditional bid.

Having failed to make the sale, the State Bank of India had in June moved the insolvency tribunal. On June 20, when the National Company Law Tribunal admitted Jet Airways for insolvency, Judge VP Singh urged that the process be completed within 90 days. In July, the resolution professional invited Expressions-of-Interest (EoIs) for the airline. However, only three parties had submitted EoIs till August 10, when the deadline ended.

Jet’s growing debt pending with domestic and foreign financial creditors is among the key issues that kept Etihad Airways away, another person involved in the process told FE. Creditors have claimed dues worth `30,588 crore from the airline. “A significant issue, besides domestic debt, is how many foreign creditors are involved. The Indian insolvency laws are ill equipped to settle these dues with foreign creditors. Interested parties have been daunted by the possibility of international litigation,” the person said.

With Etihad leaving, some lenders think liquidation is the way to go. “Lenders will most likely go for liquidation. The CoC will have to agree on a final decision, but they are unlikely to invite EoIs again,” a banking official said. He added that in the event of liquidation, lenders typically recover around 5-10% of the total outstanding debt. Financial creditors alone have claimed dues worth over `10,220 crore from the airline, as per the latest data on the company’s website.

Industry experts do not find the present scenario encouraging for Jet Airways, its lenders or the remaining employees. After the airline was grounded on April 17 and its slots subsequently reallocated, there was not much hope for revival. “Being grounded for four months would have significantly eroded the value of the airline and the underlying assets,” another aviation expert said.

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“Even before the matter went to the debt recovery court, lenders had tried and failed to find a buyer. All hopes were pinned on Etihad Airways’ participation, but the airline is in financial trouble back home. With the present situation, it is time to read the writing on the wall,” said Mark Martin, an aviation consultant.

Among the parties that evinced interest, Anil Agarwal, executive chairman, Vedanta Resources, backed out of the process. “We intend to not pursue this further,” Agarwal said in a statement last week. Agarwal had submitted the EoI through Volcan Investments, a family-owned trust. The other two EoIs were received from two foreign funds — a Panama-based entity and a Russian fund.

“Volcan Investments has not officially withdrawn the EoI. If none of the EoIs qualify, one option would be to redo the EoI process. The CoC has to decide whether that makes sense. If they decide against it, procedure dictates that we move forward with liquidation,” one person involved in the insolvency process said.

The Hinduja group, which was earlier understood to be in talks with Etihad to participate in the resolution of Jet, ultimately backed out as well. “There remained very significant issues relating to Jet’s liabilities,” the Abu Dhabi-based airline said in a statement on August 12.

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