Fresh plan for Jet Airways rescue on cards; SBI to call meeting of lenders

State Bank of India (SBI) will soon convene a meeting of all lenders to the grounded Jet to work on a fresh resolution plan based on the new Reserve Bank of India guideline for stressed assets released on June 7.

The lenders had earlier prepared a resolution plan, which envisaged fresh infusion of cash and a new partner, for the revival of the airline based on RBI’s February 12 circular. The plan provided a 180-day window after which the case had to be referred to the National Company Law Tribunal (NCLT). But the circular was set aside by the Supreme Court, and the resolution plan fell through.

The move to work on a fresh resolution plan comes even as chances of getting a new owner to take over the airlines receded after the Hindujas, who had shown interest, said they wanted legal immunity from the various cases being filed against the company. Most experts, however, say the only alternative for the banks is to refer the airline to the NCLT.  

“We have to now work on a fresh resolution plan based on the new circular on stressed assets. We will be calling a lenders’ meeting to discuss this,” said a senior official from one of the banks involved in the deal. The senior official said they would have to legally examine whether the resolution plan, prepared according to the February 12 circular, will be valid under the new rules. The banks have referred to matter to their respective legal departments. 

Jet, which shut operations after it was unable to get funding from either the shareholders or the lenders, still has over 9,000 permanent employees on its rolls, of which 700 are pilots and 2,000 are cabin crew. When the airline was operating, it had 16,000 permanent employees and over 6,000 contract workers, say Jet insiders.

 

The lenders had come out with a resolution plan in March under which the airline was to issue 114 million shares to the lenders at Rs 1. With this, the lenders would have had a 50.1 per cent stake in the company, while the stakes of promoter Naresh Goyal and Etihad Airways would fall by half to 25 per cent and 12 per cent, respectively. The lenders also agreed to provide interim funding of Rs 1,500 crore.  Later, Goyal and his family members quit the board and pledged their shares to the lenders.

The lenders, through SBI Caps, had asked for expression of interest for bidders. The response, however, was poor, with only Etihad showing some interest but making it clear it would be a minority stakeholder and the bulk of the recapitalisation requirements had to depend on other investors. With banks not putting in any fund as promised and shareholders not willing to invest, the airline had no choice but to shut operations.

Under the new guidelines, there is no strict fiat from the RBI to go to the NCLT. It has given lenders leeway and time to work on a resolution plan. In case there is a delay in implementation of the plan beyond 180 days or more of the review period, banks would need to undertake extra provisioning in their outstanding loans.