Jet Airways, Icra under Sebi lens for lapses in loan status disclosure

The Securities and Exchange Board of India (Sebi) is probing possible violations of disclosure and listing agreement norms at the troubled Jet Airways.According to sources, Sebi is examining the role of credit rating agency Icra and the airline for not making timely disclosure to investors about alleged default risk of loans worth Rs110 billion sanctioned to the company by multiple lenders.

Sources said the regulator would soon seek clarification from Jet Airways for not disclosing the loan status. The regulator is also in touch with stock exchanges to seek further details.

According to Sebi norms, credit rating agencies (CRAs) are mandated to take necessary rating action on loans availed of by companies rated by them as and when they obtain information pertaining to change in risk status. Such information is provided to the rating agency by banks or the borrower. Citing a report from the Central Repository of Information on Large Credits (CRILC) on Jet Airways, government officials said they were examining the credit information and take necessary action.

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

In its response, a Jet Airways spokesperson said, “We wish to reiterate that all our accounts with lenders are ‘standard’ and there is no overdue in any of our accounts. There have been no delays in discharging any of our loan obligations to any of the lenders.”

According to the CRILC data that the government officials were referring to showed Rs110.6 billion as outstanding (funded and non-funded) when the airline was classified as special mention account (SMA) 2. Jet, however, said that the default status by some of the banks on certain dates was only due to technical errors which were subsequently rectified in the system.

In an email response, Icra said, “We obtain a no-default statement (NDS) from all rated issuers at the end of every month, as mandated by Sebi’s ‘Monitoring and Review of Ratings by CRAs’. We can confirm we have received the NDS from Jet Airways at the end of every month during the period mentioned.” 

Icra further added it was seeking feedback on the conduct of the account from some of the banks and had not received any adverse feedback on its debt-servicing track record.

Icra clarified that CRAs do not have access to CRILC data in respect of any of the clients rated by them. The regulator has launched a probe after the airline deferred its first quarter financial results last week.

Meanwhile, Jet Airways has also been asked to inform the stock exchanges about the date on which its board would consider the June quarter financial results. The exchanges found the airline’s submission contradictory.

Citing the two separate responses filed by Jet, BSE on Monday said, “There is clear contradiction between the two submissions — outcome of the board meeting and response to exchange query with respect to disclosure verification.” The exchange asked the company to clarify the relevant facts in this matter.

According to BSE, the outcome of the board meeting dated August 9 stated: “It may be noted that the audit committee did not recommend the said financial results to the board for its approval, pending closure of certain matters. Whereas response to exchange query with respect to disclosure verification dated August 10, 2018, stated that since the management informed the audit committee that they needed more time to finalise the accounts, the audit committee on their request agreed to accord them further time to finalise the same and directed that the finalised accounts be placed before the audit committee thereafter.”

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The airline reiterated on Monday that the management sought more time from the audit committee to finalise the accounts, to which the audit committee agreed.

Last week, State Bank of India put Jet Airways’ loans on the watchlist and the civil aviation ministry said it was monitoring the situation.

Jet Airways had said in a statement that “our account with all the banks as on date is ‘standard’.” It further said it had not been placed in any SMAs by the banks, referring to the name given to accounts for borrowers that are behind in their loan-servicing payments.

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