Close on the heels of Etihad Airways stipulating tough conditions to bail out debt-laden Jet Airways, the firm’s chairman Naresh Goyal has offered to invest up to Rs 700 crore in the airline and pledge all his shares with the condition that he should be allowed to retain at least 25 per cent stake. Lenders led by State Bank of India (SBI) indicated that they are considering options to bail out the company.
“Should this not be possible, then I would not be able to infuse any funds or pledge my shares, unless Sebi accords me an exemption permitting me to increase my reduced stake (if it is to be below 25 per cent) without triggering the Takeover Code,” Goyal said in a letter to State Bank of India (SBI).
“Unless my shareholding goes below 10 per cent and/ or my group is not represented on the board, I would continue to be held out as a promoter, and be faced with the attendant exposures/ risks of being a promoter,” Goyal said.
SBI said the lenders are considering a restructuring plan for the airline. “In this connection, SBI would like to state that lenders are considering a restructuring plan under the RBI framework for resolution of stressed assets that would ensure a long term viability of the company.
Any such plan would be subject to approval of boards of the lenders and subject to adherence and clearance, if required, from the RBI and/ or SEBI (takeover code, ICDR regulations etc.) and/ or Ministry of Civil Aviation and in compliance with all regulatory prescriptions,” said an SBI spokesperson. “We have seen some media reports on certain issues concerning a resolution plan for Jet Airways. This includes speculative reports on pricing relating to any possible investment in the company,” SBI said.
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 has already written to lenders led by SBI about the possibility of increasing the stake. However, Etihad wants Jet’s founder 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.
“As part of a continuous engagement with SBI, Naresh Goyal has communicated his position on the resolution plan to SBI, which is under consideration,” the airline said in a filing to the BSE. Jet shares closed 5.09 per cent higher at Rs 284.80 on the BSE on Thursday.
The airline said discussions are progressing well with stakeholders on a comprehensive resolution plan that also contemplates equity infusion and consequent changes in its board of directors. The airline on Wednesday issued two statements saying that it has been working on various cost-cutting measures, debt reduction and funding options.
If lenders convert their debt into equity, they will hold a substantial stake in the airline. However, the company needs cash on an urgent basis as many repayments and dues are nearing the deadline.
Jet Airways recently defaulted on payment of interest and principal installment to a consortium of banks led by State Bank of India (SBI) as the airline’s initiatives to raise a Rs 1,500 crore short-term loan in order to meet its working capital requirement and payment obligations failed to materialise on time.
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 firm’s liquidity position is stressed, with operating losses, high debt levels and a negative networth. 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,” ICRA said.