Hopes sank for a late-stage rescue of Jet Airways (India) Ltd on Thursday, with the grounded airline’s bankruptcy professional revealing creditor claims totalling ₹24,887 crore, a burden few buyers will be willing to shoulder.
Financial creditors who have the first right to proceeds from a bankruptcy resolution have claimed ₹10,231 crore, while 2,400 operational creditors have claimed ₹12,372 crore.
The resolution professional (RP) of Jet Airways said that out of the ₹24,887 crore claims, it has admitted claims of ₹8,462.79 crore, all of them from financial creditors. Claims of about₹15,044 crore are under verification, while claims of ₹1,380.82 crore were rejected.
The steep claims push the airline closer to the final option of liquidation.
“No investor will be ready to take on the huge liabilities of the airline, which include claims of ₹12,000 crore from operational creditors. It is yet to be seen if the resolution professional will admit this claim from operational creditors. However, if admitted, it may be the final nail to the coffin,” said an unsolicited bidder of the airline, who didn’t want to be identified.
Of the 16,643 claims received from financial creditors, operational creditors, representatives of workmen and employees and other creditors, only 33 from financial creditors have been admitted yet.
“Jet Airways as a going concern was a very difficult proposition for revival,” said Ravi Kini, managing partner at MV Kini and Co. “There are hardly any assets, which are not mortgaged to the banks and there are multiple liabilities including pilots and employees. Additionally now, there is a claim of approximately₹12,000 crore from operational creditors. Even without the operational creditors, it was a very difficult situation but such a huge claim from the operational creditors makes it practically a dead deal.”
Among the 37 financial creditors, State Bank of India has claimed ₹1,644 crore, and Yes Bank ₹1,084 crore. Nearly 2,027 workmen and employees have made claims worth ₹4.43 crore.
“The security interest against the claimed amount are in the process of verification and will be updated in due course,” said the RP.
Among the admitted claims of ₹8,462.79 crore, domestic banks and financial institutions have made claims worth ₹6,436.12 crore, while foreign banks and financial institutions have made claims worth ₹1,568.26 crore.
The RP said: “Amounts claimed are yet to be reconciled with the books of accounts and records available with the corporate debtor. Revision, if any, will be updated post verification.
“For aircraft lessors, we are in the process of confirming if any of these are related parties under the provision of IBC, 2016.”
Jet’s committee of creditors will meet on Friday after conducting an electronic voting to decide whether to pump nearly $10 million of interim funding into the airline.
The Mumbai bench of the National Company Law Tribunal (NCLT) had on 20 June admitted Jet Airways for proceedings under the Insolvency and Bankruptcy Code (IBC) after lenders referred it to the tribunal. A consortium of 26 bankers led by SBI approached the tribunal to recover dues of more than₹8,500 crore.
The lenders have been trying to sell the beleaguered airline as a going concern for the past five months. Jet Airways has not flown since 18 April because of funding woes.
Apart from banks, the airline owes more than ₹10,000 crore to hundreds of vendors, primarily aircraft lessors, and over ₹3,000 crore to employees, who have not been paid since March, according to claims made by lawyers.
The airline has had negative net worth for long and has run up a loss of more than ₹13,000 crore in the past few years. Its total liabilities amount to over ₹15,000 crore.
NCLT will hear the insolvency case and the progress report by the RP on 23 July. The tribunal has ordered the RP to complete the IBC process in three months, though the law allows six months, saying “the matter is of national importance”.