Creditors of Jet Airways were thrown a lifeline last week. Three Expressions of Interest (EoI) were received by the consortium managing Jet’s descent to ruin.After filing its EoI, however, Indian investment company Volcan Investments soon backed out. Reports CH-Aviation, Volcan’s departure now leaves two interested parties: Panamanian investment giant Avantulo and Russia’s Treasury of the Creator RA.
Ashish Chhawchharia, Jet Airways’ resolution expert, now has the unenviable task of evaluating the bids. This in order to decide each company’s eligibility to invest.
Despite reaching out to at least 20 potential backers, the State Bank of India (SBI) failed to garner interest by its August 10th deadline. The SBI has taken on the role of advising lenders in the process of searching for investors.
According to some industry observers, the current bids for the airline are merely exploratory. In other words, not made with the sole aim of ownership of Jet. Hence, despite the EoIs the airline’s creditors may still be unable to prevent the firm’s insolvency.In June, lenders to Jet Airways decided to refer the company to the National Company Law Tribunal (NCLT) for bankruptcy proceedings. Jet’s lenders had already tried and failed to entice potential investors to make binding offers.
Off-putting state of affairs
The airline will have a hard job convincing any credible investors that it can be saved. The Indian airline owes more than $3bn to its lenders, lessors, staff and other suppliers. Furthermore, the sole yardstick for a company to enter a bid is its having a net worth of 10 billion Indian rupees ($140 million).
Etihad Airways admits the sizable debt is one of the reasons it has turned its back on Jet. Etihad did not submit an offer, in spite of its being “engaged in the process” and a minority stakeholder.
In 2013, the Gulf carrier acquired a 24% stake in Jet Airways for $379 million. The purchase was agreed at the top of Jet’s descent. At the time it promised bilateral advantages to both carriers.
We reported in May that the Gulf airline had submitted a non-binding conditional EoI with Jet in return for a minority shareholding. However, the carrier demanded promises of additional loans, if and when required, from financial investors. These promises were not forthcoming.Writes Al Jazeera, a spokesperson for Etihad said the airline was now, “not interested in reinvesting in Jet because of unresolved issues concerning the Indian airline’s liabilities […] despite the endeavors of everyone involved there remained very significant issues relating to Jet’s previous liabilities.”
Volcan Investments, a holding vehicle owned by Indian industrialist Anil Agarwal, also turned away from potential investment on Monday (12/08). Agarwal’s bid two days before was a last-minute surprise to those involved in the process. However, as it turned out, it was not a credible lifeline. A subsequent probe of Jet’s liabilities prompted Agarwal to make a sharp exit.
Following the grounding of its fleet in April of this year and efforts to revive the airline, Jet Airways creditors filed for bankruptcy. According to CH-Aviation, the court has already registered $3.5bn in claims.
The recent announcements are a setback for creditors hoping to recover a portion of the money owed by the airline to its lenders, lessors, staff and suppliers. And, worse still, the two remaining contenders have so far provided little in the way of succor.
Final bids for the airline are now due by September 12th, 2019.