The bankruptcy proceedings the State Bank of India (SBI)-led consortium of lenders plans against Jet Airways may strengthen the position of United Arab Emirates (UAE) national carrier Etihad Airways, which is a strategic partner owning 12 percent stake in the private airline. The foreign strategic partner of the Naresh Goyal-founded Jet may get the opportunity to buy the airline's assets at a much lower rate and without having to meet the Securities and Exchange Board of India (Sebi) norms, reports suggest.
Jet Airways shares plunged on the National Stock Exchange (NSE) about 30 percent by noon to Rs 47 on Tuesday following reports about the lenders' decision on Monday to invoke the IBC proceedings.
India's first private airline that began flying in mid-1993 and reigned the national skies as its biggest carrier by market share for a while touched down for the last time on April 17 under the weight of mounting debt and missed payments to suppliers and operational creditors. Jet owes lenders including overseas banks Rs 8,000 crore, reports say. The other outstanding payments total more than Rs 4,000 crore. Jet Airways market capitalization has plummeted and nearly 20,000 employees have been rendered jobless.
Goyal, who stepped down in March as executive chairman of the airline under pressure from the creditors, still owns 24 percent stake in the company but faces an exit ban along with his spouse. Though the lenders invited global bids to buy a controlling stake in the airline under a debt resolution plan that the consortium formed, no worthwhile proposals were presented, according to reports.
Etihad, meanwhile, held talks with the UK-based Hinduja group for picking up a substantial stake in the airline, but the talks soon floundered, forcing the lenders to seek proceedings under the Insolvency and Bankruptcy Code (IBC) in the National Company Law Tribunal (NCLT).
A statement from the SBI said, "Lenders have decided to seek resolution under IBC since only a conditional bid was received and requirement of the investor for Sebi (Securities and Exchange Board of India) exemptions and resolution of all creditors is possible under IBC.'' The statement added that while the lenders were making efforts to find a resolution for Jet outside the insolvency process, a decision has been taken now to seek a resolution within the IBC process due to investor requirements, a report in the Business Standard said.
Two operational creditors — Shaman Wheels and Gaggar Enterprises — have already moved the NCLT over outstanding payments and their pleas have been posted for admission on June 20. The Jet lenders' application also might get heard on the same day.
Etihad's offer during the bidding process was conditional demanding an exemption from having to meet the Sebi stipulation of a mandatory open offer for acquiring a majority stake once its shareholding crossed 25 percent. "Etihad Airways has worked consistently to find a solution which would enable Jet Airways to be reactivated as a viable entity. We will continue to constructively evaluate participation in potential solutions," the report quoted a spokesperson of Etihad as saying.
"It's over to the legal process from now on," a Jet official said. A Dutch court had declared Jet Airways bankrupt last month and had seized a Boeing 777 aircraft, the report said. According to lawyer Sumant Batra, this could complicate the insolvency process in India and NCLT will have to consider if a resolution professional can be appointed in view of the proceedings in the Netherlands.