CS, LLB, PGDBA, DSL. Pooja Ojha
With the latest Order passed by the Hon’ble National Company Law Tribunal (NCLT) on 22/06/2021 giving a nod to the Resolution Plan approved by the Committee of Creditors of the debt ridden Company, Jet Airways (India) Limited, for Rs. 15,432 Crores (approx.) of admitted debt including 7,808 Crores (approx.) of the admitted debt of Financial Creditors, it has been quite interesting to the fervent readers to be through it again and again with keen eyes at the mix and match of the pay-out avenues opted by the Successful Resolution Applicant (SRA) to take over the Company-Jet 2.0.
Within a time period of 2 years and two days (733 days) including the impact of the worldwide pandemic COVID, the Company has found a suitable resolution along with a proper recourse addressed by the Hon’ble NCLT to approach the Director General of Civil Aviation (DGCA) and Ministry of Civil Aviation, for renewal / grant of Airport Operating Permit with due despatch and the Authorities to consider such application favourably.
While there are various avenues opted by the Successful Resolution Applicant in making the pay-outs to various admitted creditors, it makes the fervent readers to go through it conscientiously to arrive as to what is the actual consideration amount in the approved resolution plan.
In this article, the author has dealt with the pay-out structure opted by the Successful Resolution Applicant to the Financial Creditors (Assenting).
For a direct arrival at the total consideration to the Assenting Financial Creditors, a tabular wise pay-out along with the nature of such pay-out to the Assenting Financial Creditors (AFC’s) has been elucidated below.
Summary of few core terms relevant for the pay-out structure to AFC’s:
1. The Resolution Plan is given on two scenarios specifically to deal with the huge Airport and Parking Dues amounting to Rs. 240 Cr (as on 31/08/2020) for the CIRP period. The same is dependent on the circumstances where the CoC decides to retain or give away to the Successful Resolution Applicant (SRA), the BKC Property as part of its resolution process.
Scenario 1: Where the BKC property is part of the resolution process.
Scenario 2: Where the BKC property is retained by the CoC members.
Except for the treatment of the CIRP cost pertaining to airport and parking Dues, the rest of the financial proposal of the SRA remains intact.
In this briefing, the author has presented the pay-out structure presuming that the BKC Property is part of the resolution process.
2. The financial proposal to the AFC’s has some definite and specific combinations of pay outs with certain time value for money attached and/ or benefits attached to it.
i. Offering upfront cash;
ii. Few debt securities with underlying assets and definite time period;
iii. Few debt securities depending upon the sale of underlying assets;
iv. Benefits attached to these underlying assets upon its sale by way of sharing of the upsides (over and above the specified base price) on these sales;
v. Equities in the Company and other subsidiaries;
vi. Left over positive Cash balance of the Company, if any;
vii. Unutilized apportioned CIRP costs, if any;
viii. Unutilized apportioned Contingent Fund, if any.
3. The Hon’ble NCLT has suggested the effective date to be 90th day from approval of this resolution plan by the Hon’ble NCLT. However, at the request of the SRA, the Hon’ble NCLT has accorded liberty to the SRA for the fact that in case of any unlikely event and that the conditions precedent are not complied within the said 90 days, the SRA could approach this Tribunal for appropriate orders with regard to extension of the timeline (effective date).
4. The below table figures out a detailed composition of the various pay-out along with the nature of such pay-out to the Assenting Financial Creditors (AFC’s) considering that the BKC property is being considered in the Resolution Plan process of the SRA, as explained above.
Financial Snapshot of pay-out to AFC
|A. Cash/ Securities/ Equities|
|Sr. No.||Mode of payment||Nature of payment||Amount/ NPV
(Rs. in Cr)
|Term||Realizable period (From effective date||Nature of security|
|1||Upfront||Cash||185||Within 90 days of the date of approval of Resolution Plan by the Hon’ble NCLT-Effective Date (with Liberty to the SRA to approach the Hon’ble NCLT for extension on account of conditions precedent.)||90 days||Secured|
|2||19.5 Lakh Series-A Zero Coupon Bonds||Debt Securities||195||To be redeemed within 730th day of the Effective Date||730 days||Secured|
|3||0.001% Non-Convertible Debentures (NCD’s)||Debt Securities||391||To be redeemed after 5 years from the Effective Date||5 years||Secured|
|4||9.5% Equity in Jet 2.0||Equity in Jet 2.0||63.48||Upon any future capitalization / Follow on Public Offer, the value of shares held by AFC will not be reduced||–||–|
|5||7.5% Equity in Jet Privilege Private Limited (JPPL)||Equity in JPPL||–||AFC’s will have the option to exercise Tag
Along Right to sell their 7.5% stake to Etihad or any other party to whom the SRA may sell the Corporate Debtor’s 42.5% stake.
|6||100% Equity in Jet Lite (India) Limited (JLIL)||Equity in JLIL||–||–||–||–|
|B. Securities and Upsides through sale of assets|
|Sr. No.||Source of payment||Secu-rities, if any||Mini-mum Guar-anteed Price (Rs. in Cr)||Term||Under-lying assets||Addit-ional Benefits||Other terms|
|1||Sale of Aircrafts||6 Lakh Series-B Zero Coupon Bonds||60||To be redee-med within 365 days from the Effective Date||Aircrafts||65% of the realized amount goes to AFC where the assets sold between Rs. 500 Cr to Rs. 750 Cr.||Costs and charges towards effecting such sale, including
airport parking charges, brokerage, maint-enance costs etc. accruing with effect from the Approval Date until the
actual date of sale and not exceeding 12% of the sale consid-eration will be reduced from the sale price before
|75% of the realized amount goes to AFC where the assets sold between Rs. 750 Cr to Rs. 100 Cr.|
|90% of the realized amount goes to AFC where the assets sold above Rs. 1000 Cr.|
|2||Sale of Aeronautical Radio of Thailand (ATR Inventory)||1.5 Lakh Series-C Zero Coupon Bonds||15||–||ATR Inventory||25% of the realized amount over and above Rs. 15 Cr goes to AFC as redem-ption premium.||Costs and charges towards effecting such sale, including airport parking charges, brokerage, wareh-ousing charges (if any), maint-enance costs etc. accruing with effect from the Approval Date until the actual date of sale and not exceeding 12% of the sale consid-eration will be reduced from the sale price before payment.|
|3||Sale of Aircraft spares||5 Lakh Series-D Zero Coupon Bonds||50||Aircraft spares||80% of the realized amount over and above Rs. 50 Cr (base value) goes to AFC as redemption premium, if any.||Costs and charges towards effecting such sale, including airport parking charges, brokerage, wareh-ousing charges (if any), maint-enance costs etc. accruing with effect from the Approval Date until the actual date of sale and not exceeding 12% of the sale consid-eration will be reduced from the sale price before payment.|
|4||Benefits on BKC property||Included in Upfront||10||Within 90 days-Effective Date||BKC property||If BKC Property is sold for an amount over and above Rs. 245 Crores in next 2 years then 50% of the upside value will be shared with the AFCs.
If BKC Property is retained by the SRA, then at the end of Year 2, the SRA will the AFCs 50% of the market value of BKC Property (over and above Rs. 245 Crores).
|C. Other Funds|
|Sr. No.||Type of Funds||Particulars||Amount (In Cr)||Application/ end use of Funds|
|Contingent Fund||A Contingent Fund of Rs. 8 Cr has been set up by the SRA.||8||As per the approved resolution Plan, the same shall be utilized for benefits in cash to the workmen.
The un-utilized portion of the Contingency Fund to the AFCs on the Closing Date.
|Positive Cash balance||The Company had a positive cash balance of Rs. 40 Crores, as on 01/09/2020.||40||The positive cash balance shall be utilized as below:
i. In case the Admitted Workmen and Employees dues Payment to all Operational Creditors, as per Section 30(2) of the Code is over and above the amount proposed, then such additional amounts shall be first paid out of the positive bank balance of the Corporate Debtor as on the Effective Date.
ii. For Airport and parking charges over Rs. 245 Crores, then the excess amounts will be first paid out of Rs. 25 Crores reserved as CIRP cost and then out of the positive cash flows of the Corporate Debtor.
iii. Any expenses incurred by the Corporate Debtor from the Approval Date until the Effective Date will be incurred out of the positive bank balance of the Corporate Debtor.
iv. It is also stated that in case the liquidation value is not NIL, then such additional amounts shall be first paid out of the positive bank balance of the Corporate Debtor as on the Effective Date.
v. The SRA proposes to pay all the positive balance standing to the credit of the Corporate Debtor to the AFCs on the Effective Date.
|3.||Savings on CIRP cost||The SRA has earmarked a specific sum of Rs. 25 Crores as CIRP cost. The SRA proposes to transfer the un-utilized portion of such CIRP cost to the AFCs on the Effective Date||25||Where the airport and parking charges are over Rs. 245 Crores, then the excess amounts will be first paid out of Rs. 25 Crores reserved as CIRP cost (if there are no outstanding CIRP cost) and then out of the positive cash flows of the Corporate Debtor.|
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