15 March 2019: The government’s unsuccessful effort to disinvest its stake in Air India notwithstanding, potential funding by the National Investment and Infrastructure Fund (NIIF) and public sector banks such as the State Bank of India into cash-strapped Jet Airways is being viewed as an attempt to keep the private airline afloat ahead of the Lok Sabha polls.
According to sources familiar with the matter, bankers have so far refused to take Jet Airways to National Company Law Tribunal (NCLT) for resolution under the Insolvency and Bankruptcy Code, as the government is keen to ensure that the airline does not go down under.
The resolution for the airline would entail state-owned NIIF infusing funds in Jet Airways in return of equity stake and banks working out ways to ensure funding for the airline, which includes banks converting their debt into equity and likely funding support. “We have studied a number of options. Detailed resolution/restructuring plans have been discussed.
Ultimately, it is the lead lender – SBI – which will have to take a call, but it is clear going to NCLT is not the solution,” a senior PSU banker having loan exposure to the airline said.
Last month, shareholders of Jet Airways cleared approved conversion of loan into shares and other proposals.
On 14 February, Jet Airways’ board approved a Bank-Led Provisional Resolution Plan (BLPRP), whereby lenders would become largest shareholders in airline. Following approval from the shareholders, part of debt would be converted into 11.4 crore shares at a consideration of Re 1 apiece as per RBI norms.
A senior government official aware of Jet Airways’ plans said that while in a scenario where market forces are left free it was healthy if an airline or an airport went bust, there were 17,000 jobs associated with the airline. The official, however, denied government playing a role in Jet Airways’ resolution. “The government only comes into the picture if there is a question of FDI rules,” he said.
Another official in the Ministry of Civil Aviation said, on condition of anonymity, that it was upon the investors to decide whether Jet Airways is a potentially good investment. “NIIF is only partially government owned and the rest of it is privately funded. We must not forget that Jet Airways has significant assets in form of the prime slots it has on both domestic and international networks, and right now, it is available at a lower valuation,” the official said.
NIIF was set up in December 2015 to catalyse funding into the country’s core sector. It has a targeted corpus of Rs 40,000 crore to be raised over the years — 49 per cent of which will be funded by the government at any given point of time, while the remaining 51 per cent of the corpus is to be raised from domestic and global investors, including international pension funds, sovereign wealth funds, multilateral/bilateral investors.
NIIF, whose governing council is chaired by Finance Minister Arun Jaitley, is currently running a master fund, a fund of funds and a strategic fund. The Master Fund has formed a $3 billion ports and logistics platform, Hindustan Infralog Private Limited (HIPL) in partnership with DP World. While the mandate for the NIIF is to invest in profit-making long-term “infrastructure assets”, it is unclear how investment in an indebted and loss-making airline will fit in with investment philosophy of fund. NIIF did not respond to queries from The Indian Express seeking comments for the story.
Jet Airways’ lead banker SBI and PNB, also did not respond to queries. Jet Airways has a debt of over Rs 8,000 crore and needs to make repayments of up to Rs 1,700 crore by March end. The airline, has however, already defaulted on repayments on external commercial borrowings.