Home / Companies / News /  11 Jet lenders could see a major haircut to their exposure

Etihad Airways PJSC has asked lenders to Jet Airways (India) Ltd to take an 80% haircut on their debt to the grounded airline for the Abu Dhabi-based carrier to make a bid, a person directly aware of the matter said.

If accepted, the step would see as many as 11 banks forced to make sizeable writeoffs to their exposure to Jet Airways, which has suspended operations since last week due to a cash crunch.

Jet Airways owes the 11 banks, including nine Indian banks, about 11,261 crore, the person said.

It owes a total of 7,251 crore to the domestic banks which include State Bank of India (SBI), Bank of India (BoI), Canara Bank, IDBI, Indian Overseas Bank (IOB), ICICI, Yes Bank and Punjab National Bank (PNB), according to the person cited above.

In addition, Jet Airways owes $330 million ( 2,100 crore) to its foreign lenders— Dubai-based Mashreq Bank and HSBC.

The airline previously raised the funds through external commercial borrowings.

While Jet Airways owes $200 million ( 1,400 crore) to Mashreq Bank, it owes $130 million ( 910 crore) to HSBC.

Besides, the airline had raised non-convertible debentures (NCDs) worth 700 crore in 2015, and has unpaid interest of about 1,000 crore.

Etihad Airways is among four bidders shortlisted to submit binding bids for Jet Airways, Mint reported on 15 April.

The other bidders are India’s quasi-sovereign wealth fund National Investment and Infrastructure Fund (NIIF) and private equity firms TPG Capital and Indigo Partners. According to the report, the four parties would be conducting independent due diligence of the airline and there is a strong possibility that Etihad, TPG Capital and NIIF may form a consortium to jointly bid at a later stage.

Potential buyers were allowed to bid for as much as 75% of the carrier.

The details of final bidders are expected to be known on 10 May. Queries sent to a spokesperson for SBI, which is heading the lenders consortium for Jet Airways, didn’t elicit any response till press time. Etihad Airways, Mashreq Bank and HSBC did not respond to emailed queries.

India’s largest public sector lender SBI has exposure to 27% of Jet Airways’ total debt.

The bank has extended credit worth 1,958 crore to the airline, including 714.78 crore as term loan and 1243.31 crore as working capital loan.

Among the other members of the lenders’ consortium to Jet Airways, Punjab National Bank (PNB) has the second largest exposure at 1,746 crore, including working capital loan of 986.28 crore and term loan of 759.47 crore. Other banks that have large exposures towards Jet Airways’ debt include Yes Bank ( 869 crore), IDBI ( 752 crore), Canara Bank ( 718 crore), ICICI Bank ( 545 crore), Bank of India ( 266 crore), Indian Overseas Bank ( 212 crore) and Syndicate Bank ( 185 crore).

Jet Airways flew its last flight on Wednesday night after lenders declined to hand out emergency funds, bringing the curtains down on an era in which it broke into a state monopoly sector to become India’s largest private airline at one point.

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