Lenders have decided to initiate insolvency proceedings against Jet Airways after failing in their efforts to find a buyer for the grounded airline. State Bank of India (SBI) said that it has received only one conditional bid, which was subject to lenders arranging for regulatory exemption on an open offer. SBI, the leader in the consortium of banks, had arranged a meeting of all lenders to decide the way forward on Jet Airways. “After due deliberations, lenders have decided to seek resolution under the Insolvency and Bankruptcy Code (IBC) since only a conditional bid was received and requirement of the investor for Sebi exemptions and resolution of all creditors is possible under IBC,” SBI said.
Another reason why lenders have decided to go for insolvency proceedings is that Etihaad expects banks to write off most of their loans to the troubled airline. While a write-off is inevitable given that assets are inadequate, lenders worry that a haircut larger than the liquidation value might be seen as favouring a business. The regulations for insolvency resolution process for corporates define a liquidation value as the amount that is realisable by selling all the assets on the commencement date of the insolvency process.
The National Company Law Tribunal (NCLT) will in any case be hearing on June 20 a bankruptcy plea application against Jet Airways by operational creditors Shaman Wheels and Gaggar Enterprises.
Shares crash 53%
Jet Airways shares extended losses and crashed 53 per cent intraday to hit a record low of Rs 32.25 on June 18 after a media report indicated that SBI filed insolvency petition against the company to recover dues. The stock lost 73 per cent of its value in the last seven days. India's largest lender State Bank of India approached National Company Law Tribunal in Mumbai against cash-strapped Jet Airways on behalf of the consortium of lenders, reports CNBC-TV18 quoting unnamed sources.
