The follow-up measure will be a rights issue, the size of which could be in the region of Rs 3,000 crore
Lenders will hold 51% stake in Jet Airways as part of the debt gets converted into equity in the first stage of a restructuring plan to rescue the cash-starved Indian carrier, a senior banker familiar with the development said.
The follow-up measure will be a rights issue, the size of which could be in the region of Rs 3,000 crore. Banks will have their shareholding reduced while Jet Airways chairman and founder Naresh Goyal will hold around 20-22% after the issue, the source added. UAE-headquartered Etihad Airways will have 40-46% stake in Jet.
According to data available till December 2018, Goyal owns 51% of Jet Airways while Etihad holds 24%. In 2013, Etihad had made the stake purchase at Rs 754.74 per share.
The rights issue is likely to be priced at Rs 150 a share, the source said. “The aim is to have an equity capital infusion of Rs 3,000 crore to meet the funding needs of the floundering airline,” the source said.
Lenders and the shareholders of Jet Airways are on the brink of reaching an agreement on a restructuring plan. “It is a complex plan and will be carried out in stages,” the source said.
For starters, debt of Rs 800 crore will get converted into equity. Banks are also writing off around Rs 800-1,000 crore of debt, the source said. Lenders will nominate one or two directors on the Jet Airways's Board.
The rights issue process will start after February 21 and is expected to conclude within three months. Jet Airways shareholders will vote on the resolution proposals at a specially convened meeting on February 21.
The interim funding to run the airline till the rights issue is complete will be arranged by Jet management, the source said. Running out of cash, Jet Airways's operations have been impacted with some of its aircraft getting grounded at various airports across the country due to non-payment of dues to the lessors.
On Monday, Jet informed the stock exchanges that it proposed to increase share capital 11-fold to Rs 2,200 crore from Rs 200 crore, by creating an additional 50 crore shares and 150 crore preference shares.
Jet had debt of about Rs 8,052 crore as on September 30, 2018. The company's losses have crossed Rs 1,200 crore for the first half of the current fiscal.
In mid-January, Goyal wrote to State Bank of India chairman Rajnish Kumar saying that he will bring in Rs 700 crore and that his equity holding in the company should not fall below a threshold of 25%. With an exposure of Rs 1,500 crore, SBI is the lead lender to Jet Airways.
Etihad, on the other hand, was bargaining hard to raise its stake to 49% from 24% at Rs 150 a share, a steep discount from Wednesday's closing price of Rs 242.15. Etihad CEO Tony Douglas had also insisted on the complete exit of Goyal and his family from the management of the carrier.
“There seems to be a climb down on the stance taken earlier by both the shareholders. While Etihad is getting some of its terms agreed upon, Goyal doesn't seem to be out completely, at least at this stage,” an industry tracker said.
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The rights issue is likely to be priced at Rs 150 a share, the source said. “The aim is to have an equity capital infusion of Rs 3,000 crore to meet the funding needs of the floundering airline,” the source said.
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