Mumbai: Minority lenders that are part of the consortium which has lent to Jet Airways have agreed to grant priority status to funding that would be provided by State Bank of India (SBI) and Punjab National Bank (PNB). This will enable SBI and PNB to provide emergency funding to keep the airline afloat until a resolution plan is in place.
Priority status for the loans would mean that if at the time of resolution lenders need to take a haircut on their historical exposure, the emergency funding would not be subject to any deductions. Normally in the case of default, lenders are hesitant to throw good money after bad. But often, like in most bankruptcy cases, there is a need for additional finance to keep the business going. This is why lenders have a provision for priority finance, where the lenders are given top priority at the time of settlement.
Earlier, SBI was not in favour of emergency funding and wanted a durable plan rather than a ‘band-aid’ solution.
