Friday, July 22, 2022

Jet lenders threaten insolvency over aircraft rental proceeds

Lenders led by the State Bank of India (SBI) could push Jet Airways into liquidation if the winning bidder, the Jalan-Kalrock consortium, disagrees on distributing the proceeds from aircraft rentals among the financing banks, two people aware of the development told ET. Aircraft rentals to Air Serbia have so far yielded about 108 crore, the people cited above said. The amount is parked with the SBI .

“At a meeting held earlier this week, the banks conveyed to the winning bidder that they will apply for liquidation if lease rentals are not distributed to verified lenders,” said one of the persons cited above.

The Jalan-Kalrock consortium has sought time until next week for a decision, the same person said. The resolution plan approved by the National Company Law Tribunal (NCLT) is silent on the distribution of the lease rentals, leading to a dispute between the lenders to the distressed airline and the winning bidder.

Jalan-Kalrock declined to comment on this matter.

“We are focused on relaunching Jet in the coming weeks,” said a representative from the winning consortium. Separately, the resolution professional did not respond to requests for comment.

Although the NCLT approved the Jalan-Kalrock consortium plan in June last year, the consortium has not yet paid to lenders.

“Effectively, the lenders are still in control of Jet Airways and the money accumulated as lease rentals should thus be distributed to them,” the second person said.

As the new owner of Jet Airways was working on receiving regulatory clearances, implementation of the plan was delayed. The Directorate General of Civil Aviation (DGCA) reinstated Jet's air operators’ certificate in the third week of May this year. Jet Airways’ flights were grounded from April 2019 due to its failure to pay for fuel and lease rentals.

The Jalan-Kalrock consortium has offered staggered payments of 380 crore. These include 185 crore upfront payment and 195 crore over two years after implementation of the plan. Lenders would also receive a 9.5% stake in the airlines. However, a part of the payment to lenders is from the sale of property owned by Jet Airways.

Lenders' recovery equates to just 5% of their claims, thus limiting the downside if the company is liquidated.

The resolution professional Ashish Chhawchharia, backed by Grant Thornton, has admitted Rs 7,453 crore in claims from verified creditors.

The airline plans to start its flights in September and is negotiating with Boeing and Airbus to order planes.

22/07/22 Sangita Mehta & Anirban Chowdhury/Economic Times

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