8 April 2019: Merchant bankers SBI Caps and Kotak Mahindra Capital have been appointed to scout for prospective buyers for the beleaguered domestic airline Jet Airways. Lenders are going to pursue a resolution in 180 days as earlier planned but will await Reserve Bank of India (RBI)’s revised framework on stressed assets.
The central bank’s new framework is expected to come in a few days time.
Bankers have postponed the date of inviting bids for potential buyers to April 10 after resolutions for the revival is yet to get the necessary regulatory approval. Bankers expect the bidding process to be completed in three weeks after the Expressions of Interest (EOI) are received. In the meantime, banks have started providing emergency funding to the airline to keep it afloat. Once the plan is approved, the banks will infuse Rs 1,500 crore through a non-convertible debenture (NCD) issue.
The resolution proposal missed the necessary legal and regulatory approvals by a whisker, as it did on the day Supreme Court quashed the controversial February 12 circular that mandated a framework to resolve bad debt of Rs 2,000 crore and above. DNA Money had reported in its April 4 edition that the airline had missed signing the resolution after the Supreme Court had struck down the RBI circular.
“The value of the airline is its brand and the goodwill it carries. In the National Company Law Tribunal (NCLT), it cannot get any value. We need to find an investor outside the Tribunal. The bidding process will take three weeks and we hope to implement the resolution by June 30, that is within 180 days,” said a senior banker of the consortium.
After Naresh Goyal, the founder of the airline, and his wife Anita were forced to resign from the airline’s Board last month, decks were cleared for a new investor. There are talks that its partner Etihad may cough up the money and increase its shareholding. Post the resolution plan, Etihad’s stake would have fallen to 12% with lenders being majority shareholders.
“There is a lot of interest from investors. But everyone will undertake due diligence which will take time. That is why we think Etihad is a good bet because they don’t have to undertake due diligence,” said a banker.
“If the verdict was a day later, we would have got the approvals. The issue is about converting 11.4 lakh shares at Re 1. The price was decided by the circular which is now nullified,” said the banker.
Even after the SC verdict, the bankers had put up a brave front saying that the bank-led resolution is on course and that EOIs will be called by April 6. But since the resolution was yet to be approved, EOIs had to be postponed until RBI comes out with a new circular.
Bankers led by State Bank of India (SBI) will wait for some clarity from the RBI before inviting bids for Jet Airways.
In a press release issued on April 5, the lenders said they were planning to pursue the bank-led resolution plan for the stake sale in a time-bound manner under the present legal and regulatory framework. The plan was to invite bids on April 6.
• Rs 1,500 cr – Banks will infuse in Jet Air through an NCD issue
• 12% – Etihad’s stake in Jet likely to have fallen to