ADVERTISEMENT

Ghosts Of Kingfisher Delay Urgent Debt Support To Jet Airways 

Lenders hold back debt support to Jet Airways fearing action from investigative agencies.

A Jet Airways India Ltd. plane prepares to take off at Chhatrapati Shivaji International Airport in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)
A Jet Airways India Ltd. plane prepares to take off at Chhatrapati Shivaji International Airport in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

Fear of prosecution like in the case of loans to now-defunct Kingfisher Airlines Ltd. has deterred bankers from extending a lifeline to Jet Airways (India) Ltd., according to three people with direct knowledge of the matter.

Lenders led by State Bank of India met on Monday to discuss whether to provide Rs 1,500-crore debt crucial for Jet Airways’ survival over the next few weeks but didn’t take a decision, the people said on the condition of anonymity. The consortium has sought either an official or unofficial go-ahead from the central government before they infuse funds, the people said.

The key worry was experience with funding fugitive economic offender Vijay Mallya’s Kingfisher Airlines about a decade ago, according to the people. Senior officials at IDBI Bank Ltd. were arrested by the Central Bureau of Investigation in 2017 for having extended Rs 900-crore loans to the airline 2009 despite its poor credit track. The investigators alleged fraudulent transactions between IDBI Bank officials and senior management at the carrier, saying bankers didn’t adequately follow credit guidelines. IDBI Bank is also among the lenders with exposure to Jet Airways.

The airline, with a debt of Rs 10,000 crore, needs money to pay employees and lessors. Jet Airways is functioning with only six or seven planes, according to Pradeep Singh Kharola, civil aviation secretary. If lessors are not paid in time, the ailing air carrier could be staring at a full shutdown, leading to nearly 20,000 employees losing their jobs. The banks had on March 25 agreed to a Rs 1,500-crore support to the carrier as part of a resolution plan under the Reserve Bank of India’s Feb. 12, 2018 guidelines on restructuring loans.

The Supreme Court, however, struck down the RBI guidelines earlier this month. In the absence of a formal regulation that can justify their action, bankers held back on extending fresh loans to Jet Airways.

Lenders await some clarification from the government so they may not be questioned later, according to the first person quoted earlier, a senior banker involved in the case. Bankers have for long delayed taking critical decisions in stressed accounts over the fear of being prosecuted by investigative agencies. A crucial business decision taken to protect an account from getting written off must not be considered as one with mala fide intent, the banker said.

In July last year, the government amended the Prevention of Corruption Act, making it compulsory for agencies to take prior approval from a competent authority before they prosecute public-sector bankers under corruption charges. The amendment followed an appeal by the Indian Banks’ Association after RP Marathe, former managing director and chief executive officer of Bank of Maharashtra, was arrested by the Pune police for alleged misconduct.

Opinion
Jet Airways International Operations To Remain Grounded Till April 18

Bid Deadline Extended

The lenders have invited expressions of interest for a stake in the struggling carrier. The deadline to submit final bids has been extended from April 30 to May 10, the second person quoted earlier, also a top banker, said.

Six investors, including Etihad Airways PJSC, have already submitted initial interest. An expression of interest is not binding and bidders are free to exit the process. BloombergQuint reported earlier that these investors were informed about Jet Airways’ current status and they expressed concern if it can actually be turned around.

Meanwhile, the banks have been extending urgent funds to pay employees and clear fuel bills to ensure that the airline remains functional, the banker said. This is to ensure that the value of the underlying company is protected and the bidders might find value while purchasing it, he said. Lenders are confident that they will find bidders.

An SBI spokesperson, in a statement, confirmed that necessary support to facilitate the process is being extended by the banks in the consortium. “Cooperation by and support from all the other stakeholders will be the key to the success of the process.”

The National Aviator’s Guild, the pilot body for Jet Airways, also urged the SBI on Monday to release Rs 1,500-crore debt support so that the company may pay its employees at the earliest. The pilot’s body claimed that employees at Jet Airways had not been paid for months.

SBI and Punjab National Bank, with loan exposure of Rs 2,000 crore each, are leading the pack of domestic lenders trying to resolve the account.

Opinion
In The Middle Of Nowhere: Jet Airways’ Employees