Jet Airways lenders to take a call on recasting loans in three weeks

Shares of Jet continued to trade weak on Thursday, falling over 6% after the crisis-hit firm defaulted on repayment of loans to a consortium of Indian banks

Lenders to ailing private carrier Jet Airways will finalise their decision on recasting loans (of over Rs 8,000 crore) and providing fresh financial support in three weeks. A source close to the development said, “Lenders are getting into the driver's seat.” He refused to elaborate further. 

Senior public sector bank executives said some bank chiefs and senior officials held a detailed discussion on the state of Jet on January 2. These were deliberations on options including fresh capital infusion by the management and/or some new investors.

While the management of the airline is yet to make a concrete proposal, indications are that Jet promoter Naresh Goyal may have to give up control. The parties concerned are meanwhile awaiting the report of Jet's forensic audit. Bankers, led by State Bank of India, will need two-three more rounds of discussions to firm up the way ahead. Critical issues such as control and fresh capital injection are in the process of being thrashed out.

Lenders also have to assess provisioning burden for the stressed account. Jet is a standard account as of now but from a sector which is showing signs of stress. Hence, prudential provisions would be more than what is done for normal account, a senior executive with a public sector bank said.

  

Following the default, Jet’s lenders would have to initiate resolution process within 180 days, according to the Reserve Bank norms. 

Earlier this week, Jet informed the stock exchange that payment of interest and principal amount due to the consortium of banks on December 31 was delayed due to temporary cash flow mismatch. It said the company had engaged with banks on the same. The default prompted Icra to downgrade Jet’s rating to ‘D’. This was the seventh rating downgrade for Jet since March 2017. Loan instruments, which are in default or those expected to touch that mark soon, are assigned 'D' rating, according to the rating agency.

As of September end, the airline had a debt of Rs 8,200 crore. Around Rs 165 crore of principal amount was due for repayment by December end, it is learnt. Discussions have been held with strategic partner Etihad Airways for fresh equity and loan guarantees and with State Bank of India for conversion of debt into equity.  Even as the Tata group had shown interest in investing in Jet, the salt-to-software conglomerate distanced itself from any deal with the Goyal-led airline subsequently.