MUMBAI -- Jet Airways' lenders will seek bankruptcy proceedings for the debt-laden Indian carrier after failing to find investors willing to support its turnaround.
The consortium led by State Bank of India decided Monday "to seek a resolution within the IBC [Insolvency and Bankruptcy Code] process," saying "only a conditional bid was received," according to a statement by the bank.
The move comes about three months after the creditor group took control of the struggling airline, which has grounded all flights as it remains unable to pay aircraft owners and employees.
The only bid came from existing shareholder Etihad Airways, but the Abu Dhabi-based carrier's offer was conditional on finding joint investors, something the lender group was unable to do.
Shares in Jet Airways plunged more than 16% on Monday after both of India's main exchanges announced trading restrictions on the stock.
The lenders now join operational creditors Shaman Wheels and Gaggar Enterprises, which approached the National Company Law Tribunal last week seeking bankruptcy proceedings against the airline.
The banks are likely to file their petition to the tribunal on Thursday, after which bankers and operational creditors will have to appoint a resolution professional to take charge of the company.
Lenders sought to avoid bankruptcy proceedings by trying to extract the most value from the airline through a stake sale. Jet Airways owes the banks around 85 billion rupees ($1.22 billion). Under insolvency proceedings, they may have to take a bigger haircut on their debts.
Jet Airways, once India's leading private-sector airline, suffered from rising losses and heavy debts as fierce competition in India's aviation industry depressed fares. The cash-strapped airline halted all operations on April 18 after the creditor group failed to agree to provide immediate working capital.
CEO Vinay Dube resigned last month, the latest high-level departure as banks weighed bids for a stake in the grounded airline. Dube's exit followed that of deputy CEO and Chief Financial Officer Amit Agarwal. The airline has endured a string of management resignations, including founding Chairman Naresh Goyal, who stepped down as a condition of the bank takeover.
Jet Airways has partially defaulted on bank loans, aircraft leases, fuel bills and employee salaries since last summer. The carrier also lost its premium parking slots, some 750 of them, and overseas flying rights.
CARE Ratings analyst Ashish Nainan said that since Jet Airways has no planes flying to available slots, there is nothing to be resolved.
"Now they are staring at 85 billion rupees worth of debt and some [more owed] to operational creditors," Nainan said. "Except for some real estate and its stake remaining stake in Jet Privilege, there is not much on offer."
"It is unlikely that anybody will bid because there is nothing to bid for," the analyst added.