Lenders file for Jet Airways' bankruptcy, hearing today

Mumbai: The consortium of 26 bankers led by State Bank of India (SBI) on Tuesday took the grounded Jet Airways to the National Company Law Tribunal (NCLT) to recover their dues of over ₹8,500 crore. The tribunal will hear the matter on Wednesday.

Jet Airways, started over 25 years ago by airline- ticketing-agent-turned-entrepreneur Naresh Goyal, stopped flying on 17 April after it ran out of cash and the unpaid lessors took away most of its 100-odd operational airplanes.

The lenders have been trying to sell the airline as a going concern since the past five months, but failed due to many a reason.

Apart from banks, the airline also owes over ₹10,000 crore to its hundreds of vendors, primarily aircraft lessors and over ₹3,000 crore to around 23,000 employees who have not been paid since March.

The airline has been having negative networth for long and has run a loss of over ₹13,000 crore in the past few year. Thus it has over ₹36,500 crore of dues and being a services company negligible assets to recover.

Also, most of its domestic airport slots have been given away to other airlines by the government and so are some of its slots at some key international airports.

On the aeroplane asset side, Jet had only 16 on its book which are valued around ₹5,000 crore as per some media reports, as the rest of its 123 fleet were on lease and most of them have been de-registered or taken away by the foreign lessors already.

The Jet shares are at multiyear lows and plunged 41% on Tuesday to close at ₹40.45 on the BSE. During the day, it tanked 52.78% to hit an all-time low of ₹32.25. In the past five trading sessions alone, the shares lost over 73% of their value.

When banks converted a part of their debt into equity when the stock was trading over ₹250 apiece. The conversion price was fixed at a nominal Re 1, though.

Following a meeting of the lenders Monday, SBI had said that "after due deliberations, the lenders have decided to seek resolution for Jet Airways under the bankruptcy code since only a conditional bid was received".

The statement further said the move was necessitated as the prospective investor (a consortium of Etihad Airways and Hinduja group) wants some Sebi exemptions waiving the open offer requirement, which can be worked out better under the bankruptcy laws.

The decision of the lenders to seek bankruptcy comes exactly two months after the airline stopped flying on 17 April, after being on the fringe since last July.

Two operational creditors--Shaman Wheels and Gaggar Enterprises-- had already taken the airline to the NCLT on June 10, which will hear the pleas on 20 June. The airline owes ₹8.74 crore to Shaman Wheels and ₹53 lakh to Gaggar Enterprises.

As the cash crisis worsened and lenders refused any lifeline to the airline under promoter chairman Goyal, who was forced to give up control on March 25, when lenders had in principal agreed to infuse ₹1,500 crore for equity.

But that never materialised, as bankers were chary of the fate of the February 12 circular of the RBI which was being heard at the Supreme Court. Finally on April 2, the apex court struck down the contentious circular, sealing the bank- led process to resolve the crisis at the airline.

With the March 25 resolution, Etihad's 24% stake was halved and it lost its board representation as well along with Goyal and his wife Anita.

Finally the airline was grounded on April 17, leaving over 23,000 employees unpaid for months in the lurch, and also sending airfares soaring by over 40 percent on average.

It can be noted that on 8 April through 12, bankers had put the airline on sale-offering 33 to 75% stake-of which the lenders own 51% now-to interested parties and received four preliminary bids and had planned to close the sale process by 30 May.