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Once India’s largest private carrier, Jet was forced to shut ops following an acute cash crunch and rising debt.mint
Once India’s largest private carrier, Jet was forced to shut ops following an acute cash crunch and rising debt.mint

Jet’s lenders may not give more cash to new owners

It has put a question mark on the revival of the carrier that hasn’t flown since April

Lenders to Jet Airways (India) Ltd may not inject fresh capital into the grounded airline and instead choose to convert unsustainable debt into equity, said two bankers with direct knowledge of the matter.

To be sure, the lenders haven’t yet received any formal request for additional funds from the new owners of Jet Airways but their pre-emptive move has put a question mark on the revival of the carrier that hasn’t flown since April last year.

“Jet Airways will require sizeable investments to be able to resume operations. Existing lenders are taking a haircut and moving out of the company. Depending on the viability study proposed of the new company, lenders will take an independent view of giving fresh funds," said the first banker mentioned above.

Concluding a long-drawn bidding process, lenders accepted on 18 October a 1,000-crore bid by a consortium comprising London-based Kalrock Capital and Dubai-based entrepreneur Murari Lal Jalan to revive the airline. The consortium has also submitted a security deposit of about 150 crore with the resolution professional (RP).

Once India’s largest private carrier, Jet Airways was forced to shut operations following an acute cash crunch and rising debt. Subsequently on 20 June 2019, the Mumbai bench of the National Company Law Tribunal (NCLT) admitted the airline under the Insolvency and Bankruptcy Code (IBC) after lenders referred it to the bankruptcy court. The NCLT appointed Ashish Chhawchharia, a partner at Grant Thornton, as the RP. The lenders subsequently decided to allow investors to bid for the carrier.

The revival plan currently awaits the approval of the NCLT, which is expected to hear it shortly.

Indian airlines have been adversely affected by the pandemic, which has dried up travel demand amid various restrictions aimed at containing the spread of the infection and anxiety among travellers. All major airlines are expected to report huge losses this fiscal.

“At this point, no bank will want to get into financing the struggling airline sector," the second banker cited above said, requesting anonymity.

Jet owes more than 25,000 crore to its creditors. This includes claims of more than 8,000 crore by creditors, who are expected to recover only a fraction of their dues.

According to the resolution plan submitted to the NCLT, lenders are expected to convert their unsustainable debt into a 9.5% stake in the carrier and a 7.5% stake in its profitable frequent flyer programme, Jet Privilege, which has been renamed InterMiles.

Mint on 20 October had reported that the winning bidders are expected to restart Jet’s op by April, and the cash recovery of creditors will be very small—initially about 700-800 crore—and will be paid in a staggered manner.

gopika.g@livemint.com

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