Anil Agarwal’s Volcan Submits EoI To Jet Airways

Volcan Investments (VI), which is the family trust of mining and metal businessman Anil Agarwal has submitted an expression of interest (EoI) to revive ailing Jet Airways. The trust pointed out that the move is “exploratory” in nature and that the “EoI is in no way linked to Vedanta”.

Three international entities — including Panama-based fund Avantulo Group and VI — had submitted their bids for Jet by the deadline set by the resolution professional (RP) handling the grounded airline’s case at the National Company Law Tribunal (NCLT). Jet’s 24% stakeholder Etihad Airways stayed away from the process.

“Volcan Investment, investment company for Anil Agarwal in an exploratory move, has sought an EoI for Jet Airways, to understand the business scenario for the company and the industry,” the trust said in a statement.

Interestingly, another British-NRI business group — the Hindujas, which had shown preliminary interest in Jet — did not submit any EoI for the airline, but the London-based Agarwal’s family trust did.

Jet was grounded on April 17-18, 2019.

The RP will decide on the eligibility of bids by Tuesday. Eligible bidders will have to submit their plans to revive Jet by September 12. The NCLT will then decide on the final resolution plan on September 27.

India had three full service carriers (FSCs) — Air India, Jet and Vistara — till April 17, and now there are only two. Air India itself faces an uncertain future with the government planning to start its divestment process.

“India may no longer be the world’s fastest growing aviation market, but it’s a steadily growing one. A market of this size needs two FSCs that can fly passengers between India and other parts of the world like the Americas, Australia, Europe and Africa — non-stop. We really hope at least one of them, AI or Jet, gets a solid buyer. Otherwise we will continue to be a rich catchment area for mediumto long-haul flights,” said a senior airline official, who did not wish to be named.

SpiceJet Reports Highest Ever Q1 Profit At ₹262 Crore

Jet Airways’ grounding has helped the aviation industry improve its financials with SpiceJet. The hike reports highest-ever net profit of ₹261.7 crore during the first quarter of the current fiscal against a loss of ₹38.1 crore during the same period last year.

The airline said that the its total income rose to Rs 3,145.3 crore for the quarter ending June 2019 as against Rs 2,253.3 crore for the corresponding quarter last year.

The company said that the operating revenues were at Rs 3,002.1 crore against Rs 2,220.4 crore for the corresponding quarter last year. On an EBITDA basis, profit is at Rs 747.5 crore as against Rs 100.5 crore for the corresponding quarter last year. Operating expenses were at Rs 2,883.6 crore as against Rs 2,227.9 crore for the corresponding period last year.

The airline also said that the best-ever performance is despite the fact that the airline has now moved to new accounting standards that impacts financial numbers.

“Effective April 1, 2019, the airline adopted the new accounting standard IND AS 116 which effectively capitalised operating leases, and as a result of this lease rentals are now reflected as interest and depreciation for the quarter ending June 2019. Additionally, owing to the retrospective treatment of this standard there is a reduction of Rs 302.2 crore from retained earnings status as at April 1, 2019,” said the firm.

The airline credits these numbers to its ability to bring in capacity, impacted due to grounding of Boeing 737 MAX, by adding Jet Airways’s planes.

“SpiceJet has been on a spectacular growth journey and this quarter, in particular, has been very special for us. We added 32 aircraft to our fleet expanding at a pace unprecedented for a sector plagued by crisis showcasing our robust business model and proven operational capabilities. We are happy that we were able to minimise passenger inconvenience by quickly filling the capacity gap created in India’s aviation sector. The results would have been vastly better but for the painful grounding of the MAX aircraft. We look forward to their swift return to service in the near future that will help SpiceJet increase its margins and provide a superior level of service.” Ajay Singh, Chairman and Managing Director, SpiceJet, was quoted in the release.

Etihad Airways, Hinduja Group Unlikely To Submit Expression of Interest By Aug 3 Deadline: Jet Airways

Etihad Airways and the Hinduja Group are likely to not submit the expression interest (Eol) for Jet Airways by August 3 deadline and may prefer to wait a bit longer before making their interest official.

Sources told Moneycontrol  that the two partners, who were the only suitors in the bidding process before Jet Airways was taken to the insolvency court, may consider entering at a later stage based on internal advice.

An executive from the industry added that instead of bidding for Jet Airways, Etihad Airways is considering monetising assets it holds in the Indian airline. The assets include airport slots and its stake in Jet Privilege Pvt: the loyalty and rewards management company.

In response to Moneycontrol’s query, an Etihad Airways spokesperson said:

“It would be inappropriate of Etihad Airways to comment on this issue, which is still the subject of a formal process.

“We will advise our position through appropriate channels ahead of Saturday’s deadline.”

 While agencies reported that Jet Airways has received interest from four bidders, Moneycontrol independently learned that an NRI investor, backed by investors, is likely to submit an EoI on August 2.

“Depending on the response, the lenders may take a call on extending the deadline beyond August 3,” an executive added.

The rethink from Etihad Airways and the Hinduja Group comes after it emerged earlier in the week, that AdiGro Aviation and a consortium of Jet Airways employees are also having second thoughts on their collective bid for the airline.

Jet Airways had suspended its operations in April, and a bidding process managed by SBI Capital Markets had seen only Etihad Airways and Hinduja Group envisaging interest. But the deal couldn’t go through as the suitors had placed several conditions.  The lenders consequently took the airline to the insolvency court.

Asset sale Etihad Airways has three slots at London’s Heathrow airport. “The company is hoping to sell three slots, each valued at $35 million. Additionally, it also hold a 50.1 percent stake in the Jet Privilege programme,” said a senior executive.

Before suspending its operations, Jet Airways was trying to raise money by selling stake in Jet Privilege. Though it had received interest from private equity players, differences over valuation had led to a stalemate. 

 However, an official said that PEs continue to express interest. 

 The possibility of selling the asset will increase if lenders fail to get a suitor, who wants to acquire Jet Airways as a complete unit. In this scenario, banks could choose to sell the airline’s assets individually. 

Jet Airways is now left with 14 aircraft. The lenders could choose to sell them to Indian airlines, including Vistara and SpiceJet, who have already leased some of its planes earlier. 

Jet Airways originally had a fleet of about 120 planes, but after defaulting on payments to leasing companies most of these were de-registered.

Jet Airways Revival On Good Hopes But Over With Claims Totallibg ₹24,887 Crore

Jet Airways’ bankruptcy professional revealed on Thursday 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”.

Banks Look For Deeper Forensic Audit Of Jet Airways

Jet Airways lenders have sought a deeper review of the airline’s financials after a limited forensic audit threw up a series of anomalies. The State Bank of India- led lenders have started the preliminary discussions with EY on a deeper forensic audit of Jet Airways’ books to capture any large financial irregularities, two people known to the matter said.

According to the people quoted above, the lenders had originally sought a limited forensic audit when Jet Airways was still operational. The limited review included a check on revenue billings, costs (excluding sales and distribution) and related party transactions identified in the books of the company, it was reported in January.

A spokesperson from EY declined to comment on the story. SBI is yet to respond to queries sent on Wednesday. This story will be updated with the bank’s responses when received.

The initial Jet Airways forensic audit found instances of related party transactions where the company had provided more than Rs 3,000 crore in loans to JetLite, without seeking approvals from the board and shareholders. The audit also found that invoices raised by Jet Privilege were not verified, leading to excess billing.

Forensic audits typically look at items that are not covered under a statutory audit. Such audits also look at end use of funds and related party transactions that are not disclosed on the company’s books to check for any large scale diversion of funds.

Insolvency Process Underway

Jet Airways is currently undergoing insolvency proceedings at the National Company Law Tribunal (NCLT). On June 20, the Mumbai bench of the tribunal admitted Jet Airways under Insolvency and Bankruptcy Code (IBC), putting the company under a 180-day moratorium against any legal proceedings.

However, this forensic audit will be done outside the ambit of the IBC to ensure that the sale of the airline, under the court approved process, is not impacted by any financial irregularities found, the second person quoted above said.

Last year, the finance ministry had asked banks to conduct forensic audits of stressed accounts with dues above Rs 50 crore, to determine whether the stress is due to genuine business troubles or fraudulent activities.

If the deeper Jet Airways forensic audit were to find instances of diversion of funds by the previous management, the lenders could approach investigative agencies for further action, the second person quoted above said.

Jet Airways owes more than Rs 8,500 crore to its lenders, more than half of which is owed to public sector banks.

On Tuesday, the financial creditors to the company met for the first time since the airline was admitted under IBC to discuss further course of action.

The creditors decided that the resolution professional will put out an advertisement seeking expressions of interest from potential bidders by the end of this week. The creditors also decided to put a proposal for $10 million in interim funding to vote on Thursday.

Jet Airways’ Grounding Finally Accepted By Banks

Two months after being grounded and also a water-bottling firm threatening to drag the carrier into bankruptcy, a consortium of lenders led by State Bank of India can finally stop pretending that a white knight is coming.

With the insolvency tribunal taking Jet Airways India Ltd. under its wing on Thursday, there may be one more abortive attempt to sell it whole. But now that lessors have taken most of the fleet, employees have all but given up on back wages, and the country’s aviation market has moved on, liquidation is the most practical solution. Little will be recovered from financial and operational creditors’ claims, which may add up to more than 140 billion rupees ($2 billion), according to local media reports. Jet, as Monty Python might have observed, isn’t exactly a Norwegian blue, pining for the fjords. It’s a dead parrot. Banks killed it with kindness.

If only they had seen that founder Naresh Goyal wasn’t able to cover costs, and was using borrowed money to keep the full-service airline afloat amid intense competition with low-cost rivals. One refusal from them to lend more without fresh equity from 51% owner Goyal, his 24% partner Etihad Airways PJSC, or the public, would have hastened the default that finally occurred in January. Even then, creditors could have produced a new controlling shareholder in an out-of-court process if they’d wrested control of the board from Goyal rather than waiting until late March. The airline could still have survived even if that had failed, with banks supplying working capital through an in-court bankruptcy process.

A new owner wouldn’t have made creditors whole, but any offer would have been better than the chump change they will get from liquidation of a grounded carrier. So why didn’t SBI and other creditors act earlier?

They probably never believed Goyal, a survivor of several tight corners in the last 25 years, was going to crash land this time. After they did wake up to that possibility, they still dithered. Banks are already swamped by $200 billion-plus of soured corporate debt. Every exposure taken to the bankruptcy tribunal means more money to be set aside from profit, which has been in short supply at Indian lenders lately.

Also, the 2016 law has already been so badly abused by owners trying to stall the sale of prized assets that banks are starting to treat in-court insolvency more like a mortuary than a hospital. However, if only basket cases come to the tribunal, or lenders start using the process as a cover for deals with people hiding from the law, they won’t have a tool left to deal with the next downturn in the credit cycle.

Prime Minister Narendra Modi can count the insolvency regime as among the more significant achievements of his first term, before the draconian cash ban of November 2016 derailed the economy. His government even empowered the central bank to resolve some of the most egregious cases of bad debt.

That reform momentum has faded, though. When the Reserve Bank of India, on its own initiative, tried to get more soured loans more speedily into in-court insolvency, the judiciary said it was acting beyond its powers. Modi’s second five-year term has just begun. He would send an encouraging signal to global investors by once again pushing taxpayer-funded banks to use the bankruptcy law, and well before errant borrowers start pushing up the daisies.

As the bungling of Jet Airways shows, no insolvency law will do any good to a financial system that has too much respect for capitalists and too little for capitalism.

Jet Airways’ Lenders Face New Challenge

The efforts of Jet Airways’ lenders to initiate insolvency proceedings against the airline is going through new challenge. The trustee has been appointed by a Netherlands court, which had last month declared the grounded airline bankrupt, seeking to intervene.

“Jet Airways has already been declared bankrupt by the Holland District Court and we want to argue the applicability of crossborder insolvency law in this case,” said counsel Kiran Sharma, who along with counsel Sumant Batra, is advising the trustee in the case.

On Wednesday, they moved an intervention application in the case. The Mumbai bench of the National Company Law Tribunal (NCLT) said it would consider the plea along with a bunch of other applications on Thursday.

The Netherlands court had declared BSE-listed Jet Airways bankrupt on an application made by two transport services providers. It has appointed Rocco Mulder as the administrator in the bankruptcy proceedings of the Indian airline company.

The foreign court’s order is unlikely to affect the other petitions before the NCLT, said Ashish Pyasi, an advocate with law firm Dhir and Dhir Associates.

“First, today there is no provision for cross-border insolvency in India under the IBC. Secondly, If the order of a foreign court is to be executed, then there is a separate provision under the civil code for execution and in the event of any conflict between the IBC and civil code, provisions of the IBC will override (the other). So, execution of such foreign order may come under the conflict,” he added.

On Wednesday, State Bank of India sought to initiate insolvency proceedings against Jet Airways, before the dedicated bankruptcy court begins hearing the complaints of two operational creditors on Thursday.

The NCLT directed the state-run bank to file its written submissions and decided to hear the matter along with the pleas of the operational creditors. “The board of directors of the company is non-existent and there is significant urgency on the matter,” Animesh Bisht, a senior associate at Cyril Amarchand Mangaldas, who is representing SBI, told the NCLT. “We have filed a Section 7 application to initiate insolvency petition against Jet Airways.”

Section 7 of the Insolvency and Bankruptcy Code gives financial creditors the power to file a plea against a corporate debtor.

However, the bench, presided over by VP Singh and Ravikumar Duraisamy, declined to immediately entertain any request. The counsel for Jet Airways pilots’ union, who too sought to intervene, was also asked to be present during the proceedings on Thursday.

The two operational creditors — ShamanWheels and Gaggar Enterprises — had earlier filed two separate insolvency pleas against the airline in the Mumbai NCLT. These cases were earlier listed for June 10, but were adjourned to Thursday. The lender’s petition is most likely to be clubbed with these.

Grounded since April 17, lenders were unable to find a white knight for Jet Airways which has accumulated debt of Rs 8,500 crore and total liabilities of more than Rs 25,000 crore. The banks involved in the turnaround of what was India’s second largest airline until last year stated that reversing its negative net worth and getting it back to the skies would be a big challenge for prospective investors.

Jet Airways Heads Towards Bankruptcy Court, Employees Forced To Map Their Own Path

With Jet Airways being referred to the bankruptcy court, the plight is now on the remaining workers at grounded Jet Airways. The employees will soon have to find a new employer to sustain.

Job hunting results have been mixed.

“It has been challenging for Jet Airways staff to get a decent job. First, they are not in an advantageous position as they are currently jobless, and second, most of the employees have been with Jet Airways for long years and have not upskilled themselves,” said Naresh Sharma, managing partner, Antal International, a recruitment firm.

“High performers have already been hired by other companies and those left behind are still struggling,” Sharma said.

But the future however doesn’t appear too bleak—several companies have stepped up to hire Jet employees, while job portals have seen a drop in applications from Jet workers in the past few months.

Ever since Jet Airways suspended flights just over two months ago, rivals such as SpiceJet Ltd, IndiGo and Vistara have unveiled plans to absorb hundreds of these employees. It is not known how many have been hired so far.

Companies in services, FMCG and information technology sectors have also announced their preference in hiring Jet employees. Indian Hotels Co. Ltd, which operates the Taj chain of hotels, issued a notice in May inviting Jet employees, according to media reports.

The lenders’ consortium of Jet Airways, led by the State Bank of India (SBI), decided on Monday to refer the airline to the National Company Law Tribunal (NCLT). The step has weakened hopes of resumption in services of the airline which has grounded flights since 17 April due to a severe cash crunch.

At the time, Jet Airways had about 16,000 employees including about 1,500 pilots. The current employee base could not be ascertained immediately.

Several Jet Airways employees have managed to secure new jobs but many are still on the hunt.

“The number of calls from Jet Airways employees has reduced by about 50% in the last one month. We understand that many candidates have been placed with other organisations especially in finance, operations and HR roles,” said Sharma at Antal.

He said more than 70% of those candidates have been placed in non-aviation sectors such as third-party logistics, facility management and service industries.

“Operations, sales and marketing are mostly the roles that we have seen Jet employees being absorbed in other sectors,” said Rituparna Chakraborty, co-founder and executive vice-president at TeamLease Services, a hiring firm. Chakraborty, who, too, has been receiving queries for back-end office roles, said the average experience of Jet employees ranged between eight and nine years.

Recruitment consultants said queries and résumé submissions by Jet Airways employees touched a peak in late April and May.

For instance, Antal India witnessed a nearly 300% surge in résumés from Jet employees during February to April. Job portal Shine.com also saw a marked increase in activity from Jet employees in the same period.

Despite the troubles faced by Jet Airways, most of its employees are still keeping the aviation industry as their first preference, followed by hospitality, BPO (business process outsourcing) and BFSI (banking, financial services and insurance industries), according to Shine.com.

Companies in the hospitality, tech startups and IT-enabled services sectors are among those who have shown interest in hiring Jet employees. After its social media announcement a few weeks ago, shared office startup WeWork India received a strong response. “We have already hired one candidate and are in the screening process for other candidates,” said a spokesperson at WeWork.

Mumbai-based SAI Estate, a real estate company, was one of the first companies to issue press releases in April to announce that they were open to hiring Jet employees. Today, the company has hired 17 former Jet employees in customer service, guest relations and sales support roles.

Bookmyshow, an online ticketing and entertainment platform, said it is in talks with some Jet Airways employees for mid-management roles.

Sharma said many of Antal’s existing clients from supply chain, FMCG/CD (consumer durables) and food manufacturing have shown keen interest in hiring candidates for mid-level management roles with eight to 12 years of experience in operations background. The reason: “They feel these candidates have strong exposure in managing operations in high pressure environment,” he explains.

Due to the extraordinary circumstances, the employees wouldn’t have much negotiating power when joining a new sector. But, as Chakraborty says, “They will have a career curve. Besides, quite a few of these employees were stagnant in their roles in Jet.”

Jet Airways’ Lenders To Start Insolvency Process

Jet Airways, after failing to find a buyer for itself now has lenders who have decided to start insolvency proceedings against the grounded airline. SBI had received only a conditional bid, which was upto the lenders to arrange for regulatory exemption on an open offer.

Another reason why the lenders decided to go for insolvency proceedings is that Etihad expects banks to write off most of their loans to Jet. While a write-off is inevitable given that assets are inadequate, lenders worry that a haircut larger than the liquidation value might be seen as favouring a business.

The regulations for insolvency resolution process for corporates define liquidation value as the amount that is realisable by selling all the assets on the commencement date of the insolvency process. SBI, the leader of the consortium of banks, had arranged a meeting of all lenders in Mumbai on Monday to decide the way forward on Jet Airways.

“After due deliberation, lenders have decided to seek resolution under the Insolvency and Bankruptcy Code (IBC) as only a conditional bid was received and the requirement of the investor for SEBI exemptions and resolution of all creditors is possible under IBC,” SBI said.

NCLT will, in any case, hear on June 20 a bankruptcy plea application against Jet Airways by operational creditors Shaman Wheels and Gaggar Enterprises. SBI has repeatedly said that insolvency is not a preferred option but only a last resort as, in the airline business, recoverability is difficult from a bankrupt organisation.

If the insolvency petition is admitted, the NCLT will appoint a resolution professional who will perform the role of the chief executive while a committee of creditors will take on the role of the board of directors. According to bankers, a reference to insolvency will reduce chances of the airline’s revival as lessors will take away all their assets. These include planes that were leased to Jet.

Lenders and employees will have the top claim on Jet’s assets, which include 16 aircraft that are owned by the airline. However, multinational banks, including US Exim, have a claim on these aircraft against their advances.