I am pleasantly surprised at the
developments relating to the bailing out of Jet Airways. The alacrity shown by
SBI and the decisions taken in days (not months), is a far cry from the usual
bureaucratic process. Irrespective of where the motivation has come from, clearly
the speed of decision making would put the best of Corporates to shame.
Agreeing to write offs of a portion of debts (taking a “haircut”, in finance
parlance), readiness to convert a substantial portion of the debt to equity (and
thereby saving the Company from annual interest costs) , forcing the Promoter
Directors to step down, the short deadlines for bidders to consider a
management takeover etc is truly novel from an Indian Bank perspective.
But you know who the winner is in
all this…? My vote is for the ubiquitous IBC (Insolvency and Banking Code 2016,
often referred to as the Insolvency Code), an Act that would have seized the
opportunity of a settlement away from the Banks and other Financiers and placed
it in the hands of a process rigor to be monitored by an Insolvency
Professional (IP), a creature of the IBC statute. The IBC process compels the
Lenders to follow a process and be subject to offers of take over from bidders.
This transparent process would leave little or no leverage with the Financiers,
who would only need to vote on the bids and not “influence” them in any manner.
It is because the IBC has not
been invoked that the SBI is able to “control” the entire resolution process. They
obviously do not want the IBC to be invoked. It has also enabled the erstwhile Promoter to
bid even when not in control. This would not have been possible under the Insolvency
Code.
So whilst Mr. Goyal plays his
hand and the SBI monitors the game, let us credit the dear old Insolvency Code
for being the Damocles sword and forcing the pace!
And let us wonder what would have
happened to a pretty bird of an Airline that just vanished into the air, if the
same alacrity were shown in its case as well!
+++
13APR19
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