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Last Updated : Jan 08, 2019 12:57 PM IST | Source: Moneycontrol.com

Lenders seek an update on Jet Airways' liquidity situation: Report

A consortium of banks led by SBI along with vendors, lessors and those providing engineering, spare parts, credit card and airport services are scheduled to meet officials of the cash-strapped airline on January 8

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Domestic and foreign lenders of Jet Airways have sought an update on the airlines' liquidity situation, according to a Mint report.

The move by lenders comes a few days after the airline defaulted on a debt payment to a consortium of banks led by State Bank of India (SBI). As a result, ICRA downgraded the long-term rating of Jet Airways to D from C and revised the short-term rating to D from A4.

The lenders are said to meet Jet Airways' executives, along with various vendors in coming days, to help the airline renegotiate contracts and revive its poor cash flow position, sources told the paper.

A consortium of banks led by SBI along with vendors, lessors and those providing engineering, spare parts, credit card and airport services are scheduled to meet officials of the cash-strapped airline on January 8, the report said.

Foreign lenders of Jet are expected to meet its executives next week, a source told the paper.

Read: Jet Airways' survival may rest on founder Naresh Goyal leaving the cockpit

According to a report by Reuters, bankers are being called to the meeting to reassure creditors -- domestic as well as overseas -- that Jet is working toward securing funding and has a repayment plan which it will share with them.

"Lenders want to ensure that the outstanding dues of lessors and vendors are sorted out to avoid any cancellation of lease contracts," a senior banker told the paper, adding that lenders may recall a loan, seize assets or slap penalties in case the borrower violates a loan covenant.

The airline has been planning to raise money from the market to repay debt and fund its operations. Jet Airways is said to be close to striking a deal with SBI for a fresh loan of Rs 1,500 crore ($215 million) to meet its working capital needs.

Read — Jet Airways close to securing Rs 1,500 crore loan from SBI: Sources

In September, the airline had informed its overseas lenders that it would raise about Rs 3,500 crore over six months through a stake sale in its loyalty programme — Jet Privilege — and infuse fresh funds into the company. However, the airline is yet to find fresh funds or monetise its stake in its loyalty programme.

Jet Airways has been undertaking cost-cutting measures such as shutting services on unviable routes and moving towards a no-frills airline by stopping free meals. Jet Airways had earlier said it intends to cut its operating cost by Rs 2,000 crore over the next two years. These measures may, however, take a few more quarters to show significant results.

The airline, part-owned by Etihad Airways, was in talks with the Abu Dhabi-based carrier to infuse more equity, but any money would be conditional on Jet's founder Naresh Goyal ceding control, sources told Reuters.

Read | Quick Take: Can Jet Airways avoid a crash landing?

Lessors have already forced the airline to ground at least four of its new fuel-efficient Boeing 737 MAX aircraft over non-payment of dues, sources told the news agency, adding more planes could be grounded if lessors are unconvinced.

According to the report, lenders of Jet Airways along with SBI Caps, are working on a restructuring package that includes conversion of debt into equity, additional loan facility and equity infusion by promoters.

SBI has appointed EY to conduct a forensic audit into Jet Airways books from April 1, 2014 to March 31, 2018. The process is underway. EY's audit is said to determine if the SBI-led consortium of banks will make further funds available to Jet Airways, which has the guarantee of its partner Etihad Airways to raise up to $150 million.

Analysts told Mint that any further restructuring steps taken by bankers may be made available on a condition that the promoter dilutes his stake.
First Published on Jan 8, 2019 12:57 pm
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