3 April 2019: Lenders to Jet Airways (India) Ltd. are finalising a plan to infuse Rs 1,500 crore into the struggling carrier through debt against promoter shares, according to two people aware of the development.
The consortium of lenders, led by State Bank of India, may ask the airline’s founder Naresh Goyal and international partner Etihad Airways PJSC to pledge part of their stake in the company to approve the debt, the people quoted above told BloombergQuint requesting anonymity. The pledged equity, they said, would be kept in a trust and will be marked-to-market regularly.
SBI has already drafted the plan and circulated it among all lenders in the consortium for their approval, one of the two people quoted above said. Final approvals are still pending.
SBI, Jet Airways and Etihad Airways have yet to respond to BloombergQuint’s emailed queries.
Rajnish Kumar, chairman at SBI, had earlier told BloombergQuint that banks would be issuing Rs 1,500 crore debt support using an unlisted security. The company, in a statement after the lenders agreed to provide a lifeline, had said the funds would be used to pay lessors, vendors, creditors and employees in a phased manner.
With a debt of more than Rs 10,000 crore, Jet Airways is struggling to pay its dues, prompting an exodus of employees and planes being grounded by lessors. The airline yesterday informed the stock exchanges that it had to ground 15 more planes due to non-repayment of dues.
Jet Airways is currently operating only 28 planes in its fleet, Bloomberg reported quoting the Directorate General of Civil Aviation. Jet Airways, however, clarified that it is flying under a curtailed schedule with enough aircraft and is compliant with all applicable rules.
Earlier, a resolution plan prepared by SBI was not accepted by Etihad Airways and the Abu Dhabi-based carrier offered to sell its stake in Jet Airways. In a last-minute alternative plan, lenders decided to take over the majority equity of the debt-laden carrier, following which Goyal and his wife stepped down from the board. Goyal also stepped down from his position of chairman at the airline. Besides, the lenders mandated the creation of an interim management committee to address the daily business needs of the carrier.
The lenders are now in the process of looking for buyers who will take over the majority equity stake and infuse more capital into the company.
BloombergQuint had earlier reported that SBI had reached out to Tata Group and TPG Capital for a potential sale of the stake. The talks are still at a preliminary stage. The lenders, however, had determined that a new buyer would need to bring in capital worth Rs 4,000-5,000 crore into the company.
Jet Airways required Rs 3,500-4,000 crore to stabilise its operations. The new buyer would also have to repay the Rs 1,500 crore debt support.