Home / Companies / News /  Jet Airways bank guarantees in focus as tribunal weighs airline revival plan

The future of Jet Airways 2.0 will depend on the outcome of the National Company Law Tribunal (NCLT) hearing on 29 November, as the airline’s winning bidder Jalan-Kalrock Consortium and financial creditors await clarity on whether ownership can be transferred on the basis of bank guarantees worth 150 crore. 

“The issue at hand is the understanding of the resolution plan. While the consortium believes that their bank guarantees worth 150 crore are sufficient for the lenders to start the process for transfer of ownership of the airline, the lenders are not of the same view," a person aware of the matter said.

“Since the consortium has not made any cash payments to stakeholders from the promised upfront amount of 185 crore, the lenders are hesitant in moving ahead with the ownership transfer process. Now, that the matter is in court, it is for the NCLT to decide whether the consortium and lenders can get on the same page or not," he added. 

In April 2019, Jet Airways, a full-service airline, shut down operations due to severe financial difficulties.

The NCLT approved Jalan-Kalrock’s resolution plan on 22 June 2021 following an insolvency process that began in June 2019.

As per the approved resolution plan, the Jalan-Kalrock consortium had proposed a total cash infusion of 1,375 crore, including 475 crore for payment to stakeholders from this. The remaining 900 crore was to be infused for capital expenditure and working capital requirements.

At 380 crore, the lenders took a steep haircut on their admitted claims of over 7,807.7 crore under the approved resolution plan.

The resolution plan stated that the winning bidder has to make an upfront payment of 185 crore to the financial creditors within 180 days from the effective date.

The effective date in this case is the date of fulfilment of all the conditions and is believed to be 20 May as per senior Jet Airways executives in the know of the matter. The airline had received its air operator certificate from the regulator Directorate General of Civil Aviation on 20 May. The remaining 195 crore is to be paid in the second year of the airline or within 730th day of the effective day via zero-coupon bonds.

As per a recent order by appellate tribunal NCLAT, the consortium has also been asked to clear pending provident fund and gratuity dues of Jet’s staff. This is expected to be about 250 crore.

“If the company doesn’t bring in the money and if the PF (provident fund) is not resolved, lenders are not anyway getting much upfront. As of now there is no clarity," said a senior banker involved in the matter.

“They are saying that you hand over the company to us and let us start using the cash in the company...we are saying this cash is part of the cash balance and it has to be used as per the resolution plan," he added.

The Jalan-Kalrock consortium is of the view that things were supposed to move forward on the basis of the bank guarantee of 150 crore, a person associated with the matter said.

“The timeline for making remaining payments has been missed as it was to be done by 20 Nov but that is no fault of the consortium as the lenders have not initiated the process including making the company complaint in Registrar of Companies, informing the stock exchanges regarding suspension of stocks, and in-principle nod from SEBI for the remaining transaction," he added.

The winning bidder of Jet Airways, Jalan Fritsch Consortium, consists of UAE-based non-resident Indian Murari Lal Jalan who will hold shares in Jet Airways in his personal capacity. The consortium also includes Florian Fritsch who will hold shares through his investment holding company Kalrock Capital Partners Ltd, Cayman.

The resolution plan had also asked the consortium to pay the lenders an upside on sale of 11 aircraft owned by Jet Airways through issue of 6,00,000 ‘Series B ZCBs’ of the face value of 1,000/- each, aggregating to 60 crore which can be redeemed within 365 days from the effective date.

“The aircraft were intended to be sold as per the resolution plan but if the plan is not implemented that these aircraft future comes in jeopardy and they will remain grounded until a resolution plan is implemented or if the court orders liquidation," another person aware of the matter said.

The winning consortium for Jet Airways (India) Ltd has also recently rolled out measures to restructure salaries in a bid to secure cash flows amid a protracted delay in resuming operations of the grounded carrier in its second avatar.“There are two main problems here. One is regarding the NCLAT order which has asked the consortium to settle dues and there is no clarity whether the consortium is ready to pay that and the other is regarding ownership transfer which will be discussed between lenders and the consortium on 29 Nov," he added.

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