N18: SBI Says No Decision Made on Taking Jet Airways to Insolvency Tribunal

25 February 2019: Jet Airways Ltd’s largest lender, State Bank of India (SBI), said media reports that it was weighing taking the debt-laden carrier to an insolvency tribunal to recoup loans were “speculative”, and that no such decision had been taken.

The statement from SBI comes days after Jet, following months of crisis-talks to plug a 85 billion rupee ($1.2 billion) funding hole, agreed a draft plan to sell a majority stake to a consortium led by the SBI at 1 rupee.

Indian media reports said on Monday SBI was mulling moving the National Company Law Tribunal (NCLT) to recover its loans from Jet as it felt the airline was running out of funds for operations.

Lenders can initiate proceedings under the Insolvency and Bankruptcy Code (IBC) to recover dues from debt-laden entities. The process can commence only after approval from the NCLT.

Jet said late on Friday that its shareholders approved the plan to convert existing debt to equity, paving the way for the airline’s lenders to infuse funds and nominate directors to its board.

Saddled with a billion dollars in debt, Jet has defaulted on loans and has not paid pilots, leasing firms and suppliers for months.

Jet Airways’ pilots, who are yet to receive a part of their November salary, have warned of ‘non-cooperation’ from March 1, should the outcome of discussions for further payout be unsatisfactory, Jet’s pilot union, National Aviator’s Guild, said.

News 18 reported

BS: Etihad conditions may delay debt-laden Jet Airways resolution plan

25 February 2019: Etihad Airways is learnt to have abstained from voting on several resolutions to convert Jet Airways’ debt into equity in the EGM the Naresh Goyal-led airline held last Thursday. Etihad has laid down stiff conditions for backing the resolution, a move that could delay the deal to bail out Jet. A delay in resolution will further squeeze Jet Airways, which is negotiating interim funding from banks.

The lenders’ consortium is considering a Rs 500-crore loan, but a final decision is yet to be taken, Punjab National Bank Managing Director Sunil Mehta had said on Friday.
However, the lenders may seek additional securities, including share pledges or guarantees from promoters, while sanctioning loans and are not planning to move the NCLT. A PTI report on Sunday, however, said lead lender SBI might consider taking Jet to the NCLT if the proposed resolution deal turned unfeasible. 

On February 21, the airline’s shareholders approved five enabling resolutions to convert its debt into equity, appoint lenders’ nominees on the board, and increase the authorised share capital of the company. 

The resolutions were passed by 97-99 per cent of the shareholders, but Etihad, which owns 24 per cent in the airline, abstained from voting, sources said. 

Etihad is waiting for clarity on the funding that State Bank of India (SBI) and National Investment and Infrastructure Fund (NIIF) will provide Jet Airways in terms of equity. 

The Gulf carrier has been pitching for SBI and the NIIF to own 51 per cent and invest Rs 2,200 crore in the airline, said sources.

Etihad has sought the right of first refusal (RoFR) after one year and wants SBI to get a confirmation from the Securities and Exchange Board of India (Sebi) that the right, if exercised, will not trigger a mandatory open offer, said sources in the know. 

Under Sebi norms, entities have to make an open offer to shareholders in case their shareholding goes beyond a threshold.

Etihad will invest in Jet under a bank-led resolution plan that seeks to bridge a Rs 8,500 crore gap. However, SBI, the lead bank in the consortium, is said to have disapproved the demand for the right of first refusal. 

“Etihad’s board is yet to approve the resolution plan and perhaps that is why they abstained from voting,” said an airline source.

However, lender sources said they would be meeting shortly — for converting part debt into equity and other elements of the resolution plan.

The Business Standard reported

FE: De-stress India’s thermal projects would need supply of 125 million tonne of coal, a challenge in today’s scenario

25 February 2019: Amidst moves to revive stressed thermal assets of 45,000-MW capacity, what has slipped under the radar is the need for coal linkages if the projects are to be made viable. For, it is estimated that, operating at 70% PLF, these plants would annually require in excess of 125 million tonne of coal, with a possible reliance on imports increasing costs and threatening project viability.

The original plan mandated such producers developing captive greenfield mines to meet their coal needs. However, it would now be difficult for the stressed assets to mobilise capital to restart projects and develop coal mines at the same time. “If a resolution for the sector has to be achieved, then a collective solution for fuel supply is needed. This could entail tasking an independent coal company to finance, develop and supply coal at notified rates to all stressed thermal assets,” says Kameswara Rao, Partner, GRID at PwC India.

With more than Rs 1 lakh crore of debt stuck in stressed thermal plants, their lenders have been trying to protect the value of the assets through resolution outside the bankruptcy courts. In the wake of an RBI order which had threatened to push all stressed power companies to the National Company Law Tribunal (NCLT), 34 power producers with a cumulative 40,000-MW capacity moved in November the Supreme Court, which offered them relief.

A Crisil report has said that “a 40-60% haircut, along with financial safeguards, can resolve as much as Rs 1 lakh crore of debt stuck in coal-based power projects.” Jaiprakash Associates’ Prayagraj Power plant became the first of the nearly dozen stressed projects to be resolved outside the bankruptcy law after Resurgent Power acquired a 75% stake in the company. In October, the apex court allowed three power projects run by Adani Power, TataPower and Essar Power to renegotiate their power purchase agreements (PPAs) to reflect the higher cost of imported coal.

Somesh Kumar, Partner and Leader-Power & Utilities at E&Y, says, “the existence of guidelines to ensure offtake of power by state discoms, and coal linkages in the form of mine allocation or e-auctions could make the revival of stressed assets smoother.” PwC’s Rao stresses that most stressed projects are inland and closer to mines. “The transportation cost itself would make it prohibitive to undertake imports. At best, a limited percentage could be used in a blend.”

As it is, oversupply in the market means these projects would find it difficult to run at above 30-40% PLF range. “Unless industrial and commercial demand improves, the stressed plants would take at least 3-4 years to take their utilisation levels beyond 40%,” says Rupesh Sankhe, a senior analyst with Reliance Securities.

At the same time, thermal power would continue to be critical for India’s needs. Commenting on the growing preference for renewable energy, Prashant Khankhoje, director Global Energy, says, “while all recent renewable tenders have discovered tariffs below the Rs 3/kWh level, we need to wait for such projects to get operational before the last word is said on them. For one, the quality of equipment they have used owing to cut-throat competition remains a grey area. For another, grid penetration and balancing would be challenging given that renewable power is not available round the clock.”

The Financial Express reported