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ICRA downgrades Jet Airways’ long-term rating to ‘junk status’

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Mumbai, May 28: Ratings agency ICRA downgraded the Airline major Jet Airways’ credit rankings to junk status on the back of a net loss reported for 2017-18.

The airline’s long term rating assigned to “Long term Loans” and “Non-Convertible Debentures” was revised to lCRA BB+ (negative outlook) from ICRA BBB- (negative outlook).

BB+ Rating is just below the investment grade rating of BBB-. It is considered as highest junk rating.

According to a BSE filing made on Monday, the company said that ICRA has revised its short term rating to “ICRA A4+” from “ICRA A3”.

“The downward revision considers weakened financial performance of the company, primarily arising out of increased jet fuel prices which could not be passed on to the customers due to weak pricing power caused by excess competition,” the filing said.

ICRA in its statement on Monday said: “ICRA has downgraded the long-term rating assigned to the Rs 698.9-crore non-convertible debenture programme, the Rs 3,574.7-crore long-term loans, the Rs 645.0-crore long-term, fund-based facilities and the Rs 600.0-crore long-term,
non-fund based facilities of Jet Airways (India) Limited to [ICRA]BB+ from [ICRA]BBB-.”

“ICRA has also downgraded the short-term rating assigned to the Rs 3,950-crore short-term, non-fund based facilities of Jet Airways to [ICRA]A4+ from [ICRA]A3. The outlook on the long-term rating is negative,” the statement added.

The downward revision comes after the company’ auditors on May 23 red-flagged its future plans on cost reduction and fund mobilisation to avert “uncertainties” created by a sudden announcement of a net loss.

ICRA said the ratings downgrade considers the weakened operating and financial performance of the company because of its inability to pass on the increase in jet fuel prices to the customers.

“The company has large debt repayments due over FY2019 (Rs 3,120.3 crore), FY2020 (Rs 2,444.5 crore) and FY2021 (Rs 2,167.9 crore). The company is undertaking various liquidity initiatives, and the timely implementation of these initiatives is a key rating sensitivity. The airline industry also continues to face headwinds of rising fuel costs and weak pricing power due to excess competition,” it added.

ICRA believes that the credit profile of Jet Airways will continue to remain stretched in the medium term until the domestic airlines industry is able to pass on the increase in jet fuel prices to the customers through an increase in fares.

“The outlook may be revised to stable if the company is able to significantly improve its profit margins through a proportionate increase in yields or a significant reduction in its CASK. Any major liquidity initiative undertaken by the company is also a positive for the ratings,” ICRA added.

The Jet Airways auditors expressed their doubt over the appropriateness of preparing the company’s financial results “on a going concern basis”.

For the uninitiated a “going concern basis” is an accounting term which basically refers to a firm’s ability to generate enough financial resources to stay in business or avoid bankruptcy.

“The appropriateness of assumption of going concern is dependent upon realisation of the various initiatives undertaken by the company and or the company’s ability to raise requisite finance or generate cash flows in future to meet its obligations, including financial support to its subsidiary companies,” Jet Airways’ auditors had said.

“Our opinion is not modified in respect of this matter.”

On last Wednesday, the company reported a standalaone net loss of Rs 1,036 crore for the fourth quarter of 2017-18 from a net profit of Rs 602.42 crore reported for the corresponding period of 2016-17.

In terms of financial year, Jet Airways reported a standalone net loss of Rs 767.62 crore from a net profit of Rs 1,482.52 crore reported for the previous fiscal.

On a consolidated basis, the aviation major reported a net loss of Rs 636.45 crore in 2017-18 from a net profit of Rs 1,498.68 crore in 2016-17.

Jet Airways shares were trading at Rs 436.50 per share at the BSE, up 7.80 per cent at 3.16 pm on Monday.

IANS

Business

Centre suspends fresh IBC proceedings till Dec

In June, the Union Cabinet approved the suspension, which came into effect from March 25 and was brought in through the ordinance route.

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Nirmala Sitharaman

New Delhi, Sep 24 : In a major relief for stressed companies amid the pandemic woes, the Centre on Thursday announced the suspension of fresh insolvency proceedings under the Insolvency and Bankruptcy Code (IBC) by three more months till December.

In a gazette notification, the Ministry of Corporate Affairs (MCA) said that the suspension on operation of Section 7, 9 and 10 of the IBC has been extended.

“In exercise of the powers conferred by section 10A of the Insolvency and Bankruptcy Code, 2016, the Central Government has extended the suspension of sections 7,9, 10 of the IBC for a further period of three months,” the Minister of Finance and Corporate Affairs, Nirmala Sitharaman said in a tweet.A

She said that the decision reinforces the government’s commitment to protecting businesses.

“It also gives companies breathing time to recover from financial stress,” she said.

In June, the Union Cabinet approved the suspension, which came into effect from March 25 and was brought in through the ordinance route.

Section 7 of the IBC allows initiation of corporate insolvency resolution process by financial creditor, while Section 9 allows operational creditors to file application for initiation of insolvency process by operational creditor.

Further, a corporate debtor who has committed a default, can file for initiation of a corporate insolvency resolution process under Section 10 of IBC.

Although the decision to extend the suspension has brought much-needed relief for business stressed in the midst of the pandemic, sector experts, however, have raised concerns regarding the financial stress it may create once the suspension is revoked.

Sumit Batra, Partner at India Law Alliance, said: “Another extension of three months beyond 25.09.2020 for initiation of bankruptcy against defaulting corporate entities will further aggravate the situation and lead to an unprecedented rise in fresh filing once the suspension is revoked.”

Noting that while the logic of suspension for not being able to initiate proceedings under Section 7 and 9 of IBC, seems justified to an extent that lockdown triggered due to widespread outbreak of Covid-19 affected the paying capacity of the corporate debtors, but “why such a suspension is being imposed for applications under section 10 seems illogical”.

The intent and extent of section 10 petition is to enable the corporate debtor to initiate insolvency against themselves in order to resolve the financial stress in a time-bound manner, Batra said, adding that, therefore, Section 10 petitions should have been excluded from being covered under this suspension.

In a recent debate in the Parliament, Finance Minister Nirmala Sitharaman had defended the decision to suspend Section 10 saying that in view of the economic situation, the companies filing for bankruptcy would not have achieved high valuations and bidding amounts would have been low, thereby not achieving the desired goal.

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Cities

RJD calls for Bihar ‘Bandh’ against farm Bills on Friday

Tejashwi himself uploaded a photograph on social media posing as a protester while driving a tractor on Thursday evening.

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Tejashwi Yadav

Patna, Sep 24 : Raising strong objections against the farm Bills, the opposition Rashtriya Janata Dal (RJD) has called for a Bihar ‘Bandh’ on Friday.

Party leader Tejashwi Yadav has asked supporters to hit the roads in each of the 38 districts headquarters of Bihar and register strong protests against the Bills.

“The farmers of Bihar are already distraught. The agri Bills will make them completely helpless. These Bills will allow industrialists to take over the agriculture sector,” he said.

Taking a dig at Prime Minister Narendra Modi and Bihar Chief Minister Nitish Kumar, he also said that if RJD supremo Lalu Yadav would shake hands with the BJP, he would be seen as “Raja Harishchandra” and the fodder scam or “Chara Ghotala” would be converted into “Bhaichaara” or brotherhood.

In Patna, supporters have been asked to assemble at the party office on Veerchand Patel Path followed by march towards Income Tax roundabout, Dak Banglow Chowk and return to the party office.

Party insiders believe it is a show of strength by the RJD.

Tejashwi himself uploaded a photograph on social media posing as a protester while driving a tractor on Thursday evening.

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India

Mira Nair, Chomsky Among Over 200 Signatories Demanding Umar Khalid’s Release

Umar Khalid has been arrested under the stringent Unlawful Activities (Prevention) Act in a case related to the communal violence in northeast Delhi in February this year.

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Umar Khalid

New Delhi: More than 200 educationists, filmmakers and authors, including Noam Chomsky and Mira Nair, issued a joint statement on Wednesday demanding the Centre free Umar Khalid arrested in connection with the northeast Delhi riots.

Besides Chomsky and Nair, the signatories include actor Ratna Pathak Shah, authors Amitav Ghosh, Salman Rushdie and Arundhati Roy, and journalist P Sainath.

“We call on the Government of India to free Umar Khalid and all those falsely implicated and unjustly incarcerated for protesting against the CAA-NRC that denies equal citizenship rights and to ensure that the Delhi Police investigates the Delhi riots with impartiality under the oath they took as public servants bound by the Constitution of India,” the statement read.

Khalid has been arrested under the stringent Unlawful Activities (Prevention) Act in a case related to the communal violence in northeast Delhi in February this year.

“We stand in solidarity and outrage, with the brave young scholar and activist Umar Khalid, arrested in New Delhi on September 14, 2020, under fabricated charges of engineering the Delhi riots in February 2020,” the statement said.

The statement said that Khalid “used the passion of his commitment to his country, marshalled his education and his voice to join the movement for equal citizenship, against the Citizenship Amendment Act (CAA)” which introduced religion as a criterion for citizenship, and has no place in a secular nation.

The Delhi Police had on September 13 said it is investigating the role of all individuals who took part in the February riots and were behind the larger conspiracy of organising violence and inciting communal passion amongst communities.

Delhi Police Commissioner S N Shrivastava had last week said the force has collected documentary evidence, including scientific evidence, to support its case in connection with the riots.

He said that the police have so far arrested 1,571 people irrespective of their caste or religion and they are almost equally distributed among both communities.

Responding to former IPS officer Julio Ribeiro’s letter in which he had questioned the Delhi police’s investigation, Srivastava had said that there are several entities who have their reasons to weave a “web of deception” and push a “false narrative of bias and insensitivity” on the part of the police.

He said that police investigations in criminal cases are guided by facts and evidence, not by reputations and personalities.

“Delhi Police are serving the oath and the Constitution with conviction, integrity and sensitivity, without fear of any self-proclaimed “true patriots” or favour towards any class, creed or community,” Srivastava had said in an email reply to Ribeiro.

Communal clashes had broken out in northeast Delhi on February 24 after violence between those supporting the citizenship law and those opposing it spiralled out of control, leaving at least 53 people dead and around 200 injured.

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