SpiceJet is trying for an out-of-court settlement with City Union Bank (CUB) in a bid to remove the Special Mention Account (SMA) tag.
According to a source, “SpiceJet isn’t willing to be declared as SMA. It has asked for meetings with CUB to ask them not to declare them a defaulter. Both the parties may come to a conclusion soon.”
However, a bank source said, “While there have been meetings, they have remained inconclusive so far.”
Declared SMI-1
In March, CUB recalled the ₹100-crore loan given to SpiceJet. It has marked the carrier as SMA-1 because it has seen incipient stress. It was classified as SMA-1 in February for an overdraft it had taken in 2014-15.
In April, SpiceJet filed an appeal in the court against the declaration of SMA-1 by CUB.
SpiceJet’s counsel had argued, CUB has illegally recalled the overdraft facility extended to the airline without any plausible reason in spite of the fact that the plaintiff never defaulted on making interest payments towards the said facility and had been paying a monthly average interest of approximately ₹1 crore. Its counsels had alleged, this was doing of the Marans (previous promotors of SpiceJet). The airline has received a temporary injunction from the Gurugram District Court against being declared a non-performing asset (NPA) by CUB.
The matter will be heard by the court in the coming week.
A company is marked as SMA-0 when principal or interest payment is not overdue for more than 30 days, but account showing signs of incipient stress. If the principal or interest payment is overdue between 31-60 days, it is marked as SMA-1. If the principal or interest payment is overdue between 61-90 days, it is marked as SMA-2. After this, the account is marked as NPA.
SpiceJet has defaulted on payments to multiple government bodies including Income Tax, GST and Employee Provident Fund. The debt-strapped company has also been tied in legal tussles with its lessors and aircraft manufacturing companies. It has a host of cases in multiple judiciaries. SpiceJet is yet to declare its Q4FY22 results.