Jet Airways revival at stake; shortlisted bidders find no value in parking funds in embattled airline

Etihad, which was keen to buy controlling stake in Jet Airways, has reportedly had a second thought to go ahead with the investment process as it could not find any value left in the embattled airline.

FP Staff April 23, 2019 13:21:51 IST
Jet Airways revival at stake; shortlisted bidders find no value in parking funds in embattled airline
  • Each bidder reportedly made discussions internally to assess if any value left in the airline for a new investor

  • Lenders of Jet Airways favour resolution outside the insolvency law framework if the bidding process fails

  • Shares of Jet Airways continued to fall for the third day in a row on Monday, closing over 6% lower

The hopes for revival of the temporarily grounded Jet Airways received a major blow as all the shortlisted bidders, including its former strategic partner Etihad Airways, are reportedly reconsidering their decision regarding buying stake in the cash-strapped airline, said media reports.

According to The Economic Times, the reason that prompted bidders to pull out of the stake buy process was reportedly the government’s decision to allocate the beleaguered airline's flight slots to rival airlines.

Apart from the Abu Dhabi-based Etihad Airways, the other bidders, who have been shortlisted for Jet Airways' stake buy, are India’s first sovereign wealth fund National Investment and Infrastructure Fund (NIIF) and private equity firms TPG Capital as well as Indigo Partners.

Interestingly, soon after Jet Airways announced  it was suspending operations temporarily on 17 April following acute liquidity crunch, each bidder reportedly had internal discussions to assess if there was any value left in the airline for a new investor, said the report.

Jet Airways revival at stake shortlisted bidders find no value in parking funds in embattled airline

Representational image. Reuters

Etihad, which was keen to buy controlling stake in Jet Airways, has reportedly had a second thought with the investment process as it could not find any value left in the embattled airline, said a Business Standard report.

"Etihad also lacks the financial strength to infuse funds for reviving Jet Airways," said the report quoting a source in the know of the matter.

Jet Airways resolution plan

A bankers' consortium led by State Bank of India (SBI) had invited bids for selling anywhere between 31 and 75 percent stake in the airline as part of the resolution plan for Jet Airways and received four initial bids from Etihad Airways, NIIF, and TPG Capital and Indigo Partners.

Jet Airways founder Naresh Goyal, who along with his wife Anita were forced out of the airline late last month by the banks, had also put in bids, but was asked to withdraw after the four bidders threatened to walk out.

The bidders' reported sudden decision to withdraw from the investment process came up even as the banks are expecting to complete the stake sale process by 10 May.

As they explore ways to recover debt, lenders of Jet Airways, which has more than Rs 8,500-crore debt, are in favour of a resolution outside the insolvency law framework in case the ongoing bidding process fails to take off, said a PTI report quoting sources.

While lenders are "reasonably hopeful" of a successful bidding process, sources said banks are working on a plan B in case things don't progress as expected.

If the bidding process fails, lenders would favour a resolution for the debt-ridden Jet Airways outside the Insolvency and Bankruptcy Code (IBC) framework, sources said. Recovery on the basis of existing security and tangible assets would be a preferred option, they added.

Under the Code, the National Company Law Tribunal's (NCLT) approval is required for initiating the process, wherein the resolution would be market-linked and time-bound.

Outside the NCLT would be a better option as far as plan B is concerned, sources said, adding that then banks would realise better value from the aircraft and other tangible assets owned by Jet Airways.

Meanwhile, shares of Jet Airways (India) Limited halted its three-day decline and surged 13 percent on Tuesday on value buying at lower levels. The scrip, after a positive opening, jumped 11.57 percent to Rs 172.50 on the BSE.

At the NSE, shares zoomed 13 per cent to Rs 174.95.

In the past three days, the scrip had plummeted 40.94 per cent.

Jet Airways has put at stake over 20,000 jobs and owes money to millions of passengers following flight cancellations that began since January apart from owing thousands of crores to its vendors and suppliers.

With PTI inputs

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