With Etihad Airways refusing to play ball and declining to put more funds in the struggling Jet Airways, lenders led by State Bank of India and the National Investment and Infrastructure Fund (NIIF) may end up acquiring the 24 per cent stake of Etihad Airways and inject more funds unless Jet chairman Naresh Goyal brings in another white knight like Qatar Airways to bail out the airline, banking sources said.
Etihad, which was dithering on injecting more funds into Jet Airways, is not comfortable with some of the terms and conditions of the bailout plan, said a banking source, adding that the foreign partner was keen to exit from Jet Airways. “Banks were keen that Etihad should come up with a workable plan involving fund injection at the earliest. But it’s not happening. Etihad has no plan to put more money in Jet Airways. It has offered its stake to lenders at a discount for around Rs 400 crore,” he said.
Bankers said time is running out fast for the airline. As the airline started defaulting in December, it will have to be referred to the NCLT under the Insolvency and Bankruptcy Code soon. “Lenders will have to do something quickly before March 31. Otherwise, we fear the worst. Jet pilots have threatened to go on strike from April 1 as they have not received salaries for the last three months,” banking circles said.
Etihad is also facing the biggest crisis in its history after the company reported a loss of $1.8 billion for the third consecutive year. The Abu Dhabi-based company said in a statement that total revenues fell by 2.4 per cent in 2018 to reach $5.86 billion, down from $6 billion in 2017. Though Goyal has reportedly started talking to Qatar Airways, it is not clear whether the airline will bail out Jet Airways at this stage.
Though Jet officials are in talks with lenders led by SBI, banks want a partner to invest funds and run the airline. “The complexity of the process though has led to some delays and will require a further short time to conclude. I once again assure you that I am personally committed to have the process completed as soon as possible and restore much needed stability to our operations at the earliest. Meanwhile talks with our strategic partner Etihad Airways and lenders led by SBI are ongoing. We are in constant dialogue with them,” Goyal said in a letter to the employees on Monday.
Jet shares fell by 3.35 per cent to Rs 229.05 on the BSE on Tuesday. On February 14, Jet Airways board had approved a bank-led resolution plan, whereby the SBI-consortium of lenders will become the largest shareholders in the airline and Goyal would exit the management as the chairman and board member. If the resolution plans goes through, banks would convert a part of their debt into 11.4 crore shares for a consideration of Re 1 as per the RBI norms. Last week, SBI Chairman Rajnish Kumar sounded hopeful of reaching an early solution by this week.
The bank-led provisional resolution plan 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 liquidity position of Jet Airways is stressed, with operating losses, high debt levels and a negative net worth. The airline has large debt repayments due over December 2018 to March 2019 (Rs 1,700 crore), FY2020 (Rs 2,444.5 crore) and FY2021 (Rs 2,167.9 crore). Credit profile of the company continues to remain stretched, characterised by negative networth and high leverage.
“Jet Airways continues to have negative networth due to accumulated losses and diminution in the value of its investments in its subsidiary Jet Lite (India) Limited,” ratings agency ICRA said while downgrading Jet recently.