19 March 2019: Etihad has flexed its muscle and told lenders of bankrupt Jet Airways to rework the resolution plan for the bankrupt airline, failing which it will press to exit the joint venture.
Sources tell ET Now that Etihad has communicated this to lenders, and added that it will not infuse emergency funds of Rs 750 crore till the resolution plan is acceptable to it. Etihad currently has a 24% stake in the airline.
This may leave the lenders with no choice but to invoke insolvency and take Jet to the NCLT.
Etihad did not respond to all the queries sent by ET Now but did send this statement as a response: “As a minority shareholder, Etihad is working closely with Indian lenders, the company and key stakeholders to facilitate a solution for Jet Airways.”
Jet still has not reverted, or answered any of the queries sent by ET Now.
The breakdown in talks is also demonstrated by Jet cancelling all flights to and from Abu Dhabi, which is the headquarters of Etihad.
Experts say the Narendra Modi government can do little till the two equity partners take a decision. It’s election year and the the incumbent government cannot afford the closure of an airline. It has already got India‘s sovereign fund NIIF to work with Jet’s lenders to take a majority stake in the beleaguered airline.
The two equity partners of Jet–Etihad and founder Naresh Goyal and family have failed to arrive at a middle ground. Sticky points range from the future role of Naresh Goyal at the airline he founded nearly 25 years ago to his equity post resolution and also the number of nominees the Goyal family can nominate to the Board.
The Etihad board has met at least twice recently but failed on both occasions to approve the MoU terms for a resolution. As per the terms Etihad is supposed to infuse nearly Rs 1,600 crore, but its stake will be capped below 25% to prevent the trigger of an open offer. This as per the MoU would be the shareholding post the expansion of the capital base. Lenders were pitching in with Rs 1000 cr as infusion for a 29.5% stake, while the NIIF was entering the cockpit with a 20% stake. Goyal’s stake was to range between 17-22%, with 22% being the upper cap. ET Now learns this has been one of the biggest bone of contentions, as Goyal is not happy with this quantum.
Etihad’s own losses are at a cumulative $3bn in 2017 and 2018 on account of investments in Europe going bad. This could very well be another reason fro Etihad seeking an exit.
Jet had been on the brink of collapse in 2013 too, and then Naresh Goyal had brought Etihad on board with a 24% stake, and ensured cash infusion of nearly Rs 3600 crore.