Jet lands in NCLT: It will be easier to find a solution, says SBI chairman

Rajnish Kumar, chairman, State Bank of India, which has the highest exposure to Jet Airways, speaks to Arindam Majumder on why the sale process did not work out. Edited excerpts:

Why did the lenders delay moving the National Company Law Tribunal (NCLT)? 

There has been a concerted effort for a resolution outside the NCLT because, unlike manufacturing industries, in the service sector there is little value left when a company is moved for insolvency proceedings. The recovery process would also have been faster. The first sign of stress was visible in November last year. The first default happened in January this year. The lenders gave time to the promoter and the partner group to go for a settlement. However, that didn’t work out. We had started the proceedings soon after. 

However, only one conditional bid came. That was in the second week of May. Etihad wanted a majority Indian partner but ultimately it didn’t work out. Some time went in that negotiation. 

What proved to be a hurdle for the interested bidders? 

There were some conditions such as the bidders wanting exemption from the takeover code and hair cut from operational creditors.

Now, exemption from open offer will be available under the Insolvency and Bankruptcy Code (IBC) proceedings. It’s not easy to deal with 900 creditors outside insolvency proceedings. It will be easier to come to an agreement now. 

So you expect there would be a positive response from investors in the IBC? 

We were surprised to see that Jet Airways still evinced interest from investors despite the financial crisis. The only issue is that 

investors wanted exemption from past debt and creditors, which is very fair as everyone wants their investment to be protected. 

Would it have been much easier to find a buyer for Jet had it been a going concern? 
 

It is true that it would have been of better value if it had been a going concern. We tried taking all steps to do that. But there were some conditions that were not being fulfilled due to which priority lending could not be extended.

Then, who would have run the airline?

I don’t think an airline can be managed on a day-to-day basis by resolution professionals. It’s a very complicated business. 

What is left for investors to buy in Jet Airways? 

In service sector industry, there are minimum tangible assets left in insolvency proceedings. There are bilateral rights, airport slots and licence to operate an airline.