Delay in infusing Rs 1,500 crore emergency funds puts Jet Airways in a spot

Lenders yet to reach consensus, wait for new investors' plan

Lenders to Jet Airways are unwilling to release Rs 1,500 crore of emergency funding to the debt-laden airline in one instalment despite promoter Naresh Goyal pledging 41.2 per cent of his shares. 

A delay by banks to infuse more funds into Jet may not only force the airline to ground its operations but may also make it difficult for the lenders to sell the company, which is not a ‘going concern’. 

“All regulatory process regarding Naresh Goyal pledging his shares has been completed. The management has clarified to the lenders that all due process has been followed. Despite that there is no communication from the lenders about the infusion of funds,” said a person aware of the development. The Jet board on Thursday met to take stock of the operations. 

According to the resolution process, lenders had promised to infuse Rs 1,500 crore into the airline as interim funding and agreed to grant priority status to funding. Priority status for the loans meant that if lenders need to take a haircut at the time of resolution, the emergency funding would not be subject to deductions, thereby reducing the risk. Simultaneously, the lenders had asked Goyal to pledge his stake. 

Sources aware of the development, however, said there was no consensus among the lenders, leading to the delay. The banks are releasing the amount in small tranches, which is not sufficient to maintain daily business. “For instance, the lenders released just Rs 20 crore on Wednesday. It was barely enough to clear the fuel bill. Airlines are a capital intensive business and it needs a minimum money for daily operations. Things are deteriorating daily and the survival of the airline has come under question due to this,” the person said. The banks have so far released less than Rs 350 crore of the proposed Rs 1,500 crore. 

A senior executive of a bank, which is part of Jet lenders’ consortium, said there was no consensus among the banks to release the fund. “While State Bank of India, the lead banker, has agreed to infuse the funds granting it priority funding, others in the consortium have not agreed to the plan. They are waiting to see if there is any serious investor who would be able to drive the operations of the airline,” he said. Multiple calls and text message to SBI Chairman Rajnish Kumar on the matter were not responded to. 

But a senior executive of the airline pointed out the stake sale process would take time and the airline urgently needs the funding in the interim to remain afloat. “The selection of a bidder itself would take at least three weeks. Even after selection, there are multiple approvals required from the market regulator, aviation regulator, and security clearance. We are looking at a period of minimum two to three months. The airline has to be sold as a going concern and for that funding is required,” he said.

Jet on Thursday cancelled all international operations along with several domestic flights. Due to non-payment of dues, creditors have grounded aircraft, leaving Jet with just 13 airplanes. “We have been let down by SBI. If the banks are serious about a recovery, substantial amount should be released immediately. Around 20,000 jobs are at stake,” said Ashim Valiani, vice-president of National Aviators Guild, Jet’s pilot union.