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Jet Airways board approves rescue deal, banks to get over 50% stake in bailout plan

The resolution plan allows the lending consortium to nominate members on the board. The company called an extraordinary general meeting on February 21 for shareholder approval.

Jet Airways, Jet Airways etihad deal, jet airways debt, naresh goyal debt, jet airways stake sale, jet airways ticket booking, indian express news Equity holding of Goyal and Emirates to come down by half to 25% &12%, respectively. (File/Bloomberg)

The board of struggling Jet Airways Ltd, which recently defaulted on debt repayment, has agreed to give lenders the majority stake of 50.1 per cent by converting part of its debt into equity as part of a resolution plan worked out by lenders.

In a stock exchange filing, the loss-making airline said the board, as part of a bank-led provisional resolution plan, agreed to allot 11.4 crore shares at an aggregate value of Re 1 to the lenders’ consortium led by State Bank of India. After the conversion, the lenders will end up owning 50.1 per cent in the carrier controlled by Naresh Goyal. As a result, equity holding of Goyal and Etihad Airways will come down by half to 25 per cent and 12 per cent, respectively.

The resolution plan allows the lending consortium to nominate members on the board. The company called an extraordinary general meeting on February 21 for shareholder approval.

The bank led provisional resolution plan (BLPRP) prepared by the lenders currently estimates a funding gap of Rs 8,500 crore (including proposed repayment of aircraft debt of Rs 1,700 crore) to be met by appropriate mix of equity infusion, debt restructuring, sale, sale and lease back and refinancing of aircraft, among other things. The BLPRP will be presented for consideration of each of the following: the consortium of lenders, the Overseeing Committee of the Indian Bankers’ Association, the board of directors of Etihad Airways and the promoter Goyal.

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Thereafter, the implementation of the final bank led resolution plan (BLRP) will take place under the guidance of a monitoring agency. “This implementation and any action thereon will be under the provisions of and subject to receipt of all applicable statutory, regulatory, contractual and corporate approvals and consents, including that from the Securities & Exchange Board of India, Ministry of Civil Aviation and Competition Commission of India, as may be required,” the company said.

After the company receives the requisite approvals from shareholders at their meeting scheduled to be held on February 21, 2019, the provisional plan (BLPRP) proposes conversion of lenders’ debt into 11,40,00,000 shares of Rs 10 each by allotment of such number of equity shares to the lenders that would result in the lenders becoming the largest shareholders in the company. Such allotment of 11,40,00,000 shares will be made at an aggregate consideration of Re 1 only since under the RBI circular, lenders can convert debt into equity at Re 1 when the book value per share of a company is negative.

The market value of 11.4 crore shares at Thursday’s share price of Rs 225.80 works out to Rs 2,574 crore. The BLPRP also proposes sanction of appropriate interim credit facilities by domestic lenders on terms to be agreed and appropriate governance structure including the board composition in accordance with applicable statutory and regulatory requirements.


The airline was earlier in talks with Emirates for fund infusion and more stake for the Gulf-based airline. Etihad, which holds 24 per cent stake in Jet Airways, had offered to buy Jet shares at a 49 per cent discount — at Rs 150 per share — and bail out the carrier. Etihad CEO Tony Douglas had written to lenders led by SBI about the possibility of increasing the stake. However, Etihad wanted Jet’s founder and chairman Goyal to step down from the board and his stake to be slashed to 20-22 per cent from 51 per cent.

Etihad has also reportedly sought exemption from making an open offer to other shareholders which was not agreed by the Sebi.

Rating agency ICRA downgraded the airline’s Rs 10,963 crore loan and debenture ratings to the ‘D’ category. Instruments with ‘D’ rating are in default or are expected to be in default soon. The company’s liquidity position is stressed, with operating losses, high debt levels and a negative networth.

First published on: 15-02-2019 at 04:59:52 am
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