State Bank of India (SBI) on Tuesday moved the Mumbai bench of National Company Law Tribunal (NCLT) for resolution of Jet Airways under the Insolvency and Bankruptcy Code (IBC). Jet Airways shares plunged nearly 41 per cent on the stock exchanges following the decision of lenders to take the airline to NCLT.
NCLT is likely to take up the petition on Wednesday. Other banks in the consortium which lent funds to the crippled airline are also expected to join the petition. “We are hopeful of a resolution under the IBC rather than liquidation. Bidders are likely to be attracted by exemptions under IBC. Exemption from Sebi open offer may be possible through IBC,” said a banking source.
Jet Airways owes over Rs 8,500 crore to lenders.
Etihad Airways, which holds around 24 per cent stake in Jet Airways, was the only shortlisted bidder to put in a bid. The Hinduja group later made its interest in Jet Airways public, and the two groups were in talks for a possible deal. Lenders said that they had received just one conditional bid, and that the investor had asked for SEBI exemption.
Meanwhile, Jet Airways scrip plummeted 40.78 per cent to close at Rs 40.45 on the BSE. During the day, it tanked 52.78 per cent to hit an all-time low of Rs 32.25. Over 60.5 lakh shares of the company were traded on the BSE and over four crore shares on the NSE during the day. This the 12th consecutive trading day’s fall for Jet Airways and the scrip has plunged over 73 per cent during this time, wiping out Rs 1,253.5 crore from its market valuation on the BSE. The scrip has also been on a backfoot following announcement that stock exchanges will impose restrictions on trading in Jet Airways’ shares from June 28 as part of preventive surveillance measures to curb excessive volatility, according to a circular issued last week.
Banks to take a hit if Jet goes for liquidation
As per the IBC procedure, once NCLT takes up the case, an Insolvency professional (IP) will be appointed who in turn will assess the company’s financial position and work out potential resolution plans, including liquidation or identifying a suitable investor. If the airline goes for liquidation, banks are unlikely to get much as there are not much tangible assets for loan recovery.
After a meeting of the 26 lenders on Monday, SBI in a statement 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 fate of the airline, which shut down operations on April 17, 2019 after it ran out of cash, will be decided as per the June 7 circular of the RBI.
After the airline shut operations in April, lenders led by SBI opted for a bidding process to identify an investor to take over the airline. SBI Capital Markets was entrusted with the job of the bidding process which got three bids, including one from Etihad with almost the same conditions that it stipulated in March.
WIth the bidding process failing to identify a suitor, lenders approached corporate houses with deep pockets, including the Hindujas.