The Jet Airways stock tanked 4.87% to Rs 232.65 on Monday, after ratings agency ICRA dowgraded the company’s credit rating to ‘[ICRA]D’, the lowest it awards to companies, implying debt servicing challenges.
Debt instruments with this kind of rating have either defaulted or are expected to default soon.
However, Jet — India’s third-largest airline by passenger volumes — said the delay in debt servicing, which led to the adverse rating action, had already been resolved in the previous fiscal and the airline’s representatives were in touch with ICRA.
In a report dated August 21, ICRA mentioned that it had revised the rating assigned to Jet’s long-term, fund-based bank facilities worth Rs 3,210 crore to ‘[ICRA]D’ from [ICRA]BB earlier. The agency also gave its lowest rating to Jet’s short-term, fund and non-fund based bank facilities worth Rs 4,250 crore from ‘[ICRA]A4’ earlier.
“The ratings revisions reflect delays in debt servicing by the company,” the ICRA report said. Since January, Jet has lost 19.52% of its market value while the Sensex has gained 24.9%.
Jet Airways officials said they have taken up the issue with Icra on Monday to “to set the record straight.”
“It is very disappointing that the recently published ICRA downgrade is based on a historical delay in debt servicing, which occurred and was resolved in the previous financial year,” a Jet spokesperson said in a statement.
“In fact, there was no outstanding default in the repayment of dues to the financial institutions and banks as at March 31. Jet Airways can confirm that the airline is current on all its loan obligations and interest payments.”
But Icra claims its ratings action on Jet was in line with what regulations stipulate. “According to Sebi (Securities and Exchange Board of India) guidelines, if there is a delay in servicing of loans, where there is a payment schedule as per terms of agreements, the ratings have to go to D, which happened in the case of Jet Airways,” said an Icra official on the condition of anonymity since he is not authorised to speak to the media.
If Jet has been servicing its debt regularly in the last three months and the information Icra gets from the company is satisfactory, it can revise the rating upwards again, the official said.
Spokespersons for Canara Bank and Bank of India said the Jet loan was a standard account in their books.
A senior executive with a public sector bank told FE that