Jet Airways, rating agencies under scanner for lapses in loan status disclosure

In mounting troubles for crisis-hit Jet Airways, the airline and some credit rating agencies have come under regulatory scanner for alleged lapses in timely disclosure of default risk of loans worth Rs 11,000 crore taken from state-owned as well as private sector banks, officials said.

While the concerned loan accounts are believed to have been standardised now, it has been alleged that they were in default on multiple occasions during the quarter ended June 30 and are continuously on watch list of the lenders, regulatory officials said.

Officials from credit rating agencies maintained that they have been going by the month-end status report submitted by the airline in which they had maintained that there was no default.

Jet Airways, which is grappling with financial woes, had last week deferred announcement of its financial results for the June quarter and is yet to announce a date.

While the capital markets regulator Sebi is already looking into the issues surrounding deferment of the airline's financial results following reservations expressed by the company's audit committee, the issue of disclosure about alleged loan default is also being examined now, officials said.

While Jet Airways did not immediately reply to PTI queries in this regard, rating agency ICRA said it has been regularly receiving the no default declaration (NDS) in the Sebi-prescribed format from the company at the end of every month and the same has been received for the month of July as well.

With reference to a recent statement by SBI's Chairman on the status of the loan account, ICRA said the Jet Airways management has confirmed in writing that that it "is regular in all its payments to all banks".

"We are also checking on the conduct of the account independently from banks," ICRA said in response to PTI queries.

SBI Chairman Rajnish Kumar had said last week that the bank's exposure to Jet Airways was part of a "watch list".

A day later, Jet Airways however said it is "regular" in all payment obligations including to all its banks.

"Our account with all the banks as on date is 'Standard'," Jet Airways had said in a statement.

Officials said Sebi is looking into the role of Jet Airways as well as of rating agencies regarding timely disclosure to investors about alleged default risk of loans availed by the company.

A credit rating agency is required to take necessary rating action on a loan availed by a company rated by it as soon as it gets information about change in the default risk status.

Officials cited information from a central repository of large credit accounts that the loans extended by some PSU and private banks to Jet Airways were under default on several occasions between February and June, though they have been standardised later.

"In case of all accepted ratings, our ratings on the bank lines of Jet Airways also remain under regular surveillance and we would respond to any new information subject to the necessary due diligence and confirmation from bankers/lenders/issuers," an ICRA official said.

"We would also like to highlight that we have been regularly receiving the no default declaration (NDS) in the Sebi prescribed format from the company at the end of every month, and we have received the NDS for the month ended July 2018 as well," he added.

In May, ICRA had lowered credit ratings on Jet Airways' long-term loan facilities to BB+, which indicates moderate default risk. Jet had last received default-grade rating in 2014 when it had delayed debt repayments.

Jet Airways has already been asked by the stock exchanges to explain clearly why it deferred the results and what were the issued raised by its audit committee, if any.

The company has also been asked to inform the exchanges about the date on which its board will consider the June quarter financial results.

Amid plummeting share price of the company, Jet Airways Founder Chairman Naresh Goyal had told shareholders on August 9 that he felt "guilty and embarrassed" as a lot of shareholders have lost their money.

Jet share price today rose 3.6 per cent to close at Rs 286.5 on BSE, after falling nearly 15 per cent since the beginning of this month.