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India’s oldest private carrier is headed for the bankruptcy court as nobody wants to buy it

Pramod Mathew

Lenders to India’s oldest private carrier, Jet Airways, have finally decided to refer the carrier for bankruptcy proceedings after their harrowing search to find an investor came to naught.

The airline’s lenders, a consortium of banks led by the State Bank of India (SBI) said in a statement yesterday (June 17) that they will soon approach the National Company Law Tribunal (NCLT), India’s insolvency court.

The consortium had taken control of the airline, from founder Naresh Goyal, in March hoping to rope in an external investor to revive the airline and recover their dues. A formal bidding process to invest in the airline was soon initiated by SBI Capital markets, the lead lender’s investment arm, but the process elicited only one bid—from Etihad Airways.

The Abu Dhabi-based airline had agreed to invest provided it remained a minority investor. It had also sought regulatory exemptions from India’s markets regulator Securities and Exchange Board of India (Sebi) and wanted lenders to take a major write-off on the Rs8,500 crore ($1.2 billion) debt that Jet owes them.

These stringent conditions ultimately threw the spanner in the works.

“After due deliberations, lenders have decided to seek resolution under the Insolvency and Bankruptcy Code (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,” the statement by lenders yesterday read.

The banks had made a final attempt to convince the Hinduja Group to partner Etihad Airways, but the conglomerate finally walked out on the proposal despite expressing initial interest. This sealed the fate of Jet, India’s oldest private carrier.

Lenders hit

The SBI-led consortium had so far refrained from approaching the NCLT as selling off Jet’s assets under the insolvency process will only yield a fraction of their total dues.

Moreover, other creditors, too, have a claim on Jet’s assets. The airline’s liabilities to employees and vendors amount to Rs6,500 crore.

On June 10, two operational creditors, Shaman Wheels and Gaggar Enterprises, had approached the NCLT’s Mumbai bench with their own insolvency pleas to recover dues. Ahmedabad-based Gaggar was a mineral water supplier to the grounded airline, while Mumbai-based Shaman deals in passenger vehicles trucks, trailers, and semi-trailers. The pleas have been adjourned to June 20.

Jet’s pilots’ union, the National Aviator’s Guild, also has plans to approach the NCLT to recover their unpaid salaries, according to the Mint newspaper.

Now, all that remains to be seen is how much dues creditors can recover if the tribunal accepts their pleas.

The airline, which has been grounded since April 17, has been steadily losing pilots and other assets. While its prime slots at airports have been assigned to rival airlines, it’s immovable assets like its office space in Mumbai’s Bandra Kurla Complex too are on the block.

“It has become like a garage sale, and difficult to see who would like to put money in this. It is difficult to explain the way banks have handled this. This clearly has been an absolute waste of time,” Mark Martin, founder of aviation advisory firm Martin Consulting told moneycontrol.com.

 

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