Once called the second-largest Indian carrier, Jet Airways is now completely drenched in debt and on the verge of becoming bankrupt. After facing multiple headwinds in the past, the Indian carrier has lost its sheen in the aviation industry. In an attempt to slash down debts, SBI Caps had earlier come forward as a transaction advisor for Jet Airways and proposed plans for infusing funds. However, no schemes have worked so far as a consortium of lenders along with SBI Caps is unable to find the right buyer for the Indian aviation firm.
As a result, the consortium of lenders has planned to take the aviation company to bankruptcy court after not finding a right investor or buyer for it in the last five months.
The lenders will be filing a petition in Mumbai NCLT (National Company Law Tribunal), according to a media report.
Lenders have decided to seek resolution under IBC since only a conditional bid was received and requirement of the Investor for SEBI exemptions and resolution of all creditors is possible under IBC. Lenders led by State Bank of India have been making efforts to find a resolution for Jet Airways outside IBC but in view of the above, lenders have decided to seek a resolution within the IBC process, SBI said in its statement, as reported by daily news, The Economic Times.
A Failed Attempt to Shore up Jet Airways
After Naresh Goyal stepped down from Jet Airways board, SBI Caps along with lenders began its search for ascertaining a right fit to handle the debt-laden aviation company. The consortium had shortlisted two interested bidders that are, Hinduja Group and Etihad. However, both the parties were turned away as they demanded 85 per cent haircut on the Indian carriers debt.
Etihad and the Hinduja group, the two interested bidders, were demanding over 85% haircut on Jet Airways debt which was unacceptable to lenders, sources said, according to a media report.
There was also a proposal to pay only $400 million to lessors which were rejected as well. Etihad was seeking an open offer exemption and pricing concessions which didnt go down well with the lenders as they couldnt give these relaxations, sources added.
Since bidders demands could not be met, thus, the consortium has had to resort to the last resolution so as to pay off debts.
The Sinking Indian Carrier
Naresh Goyal-led carrier was incorporated in 1992 and it steadily became a huge name in the aviation industry. Over the years, the aviation company grew exponentially and hence, became the second largest carrier to run in India. However, inflation in oil prices, depreciation of the Indian currency and low-budget fares doomed Jet Airways. Consequently, the aviation company shut down on April 17, 2019, as it did not have funds to carry out its operations.
Following this, aviation staff were laid off without disbursing remuneration to many employees. Considering the past successes and trajectory of Jet Airways, SBI Caps, a lending and banking institution tried to help the company but could not avert it from falling apart.
As the count of debt has gone beyond INR 8,000 Crore and companys liabilities reached up to INR 25,000 crore, bankruptcy is being considered to be the last option as the bidders ( Hinduja Group and Etihad) are making unacceptable demands.