An extraordinary general meeting called by crisis-ridden Jet Airways on Thursday for getting stakeholders' approval for a rights issue
Decks are being cleared for banks to be appointed on the Board of crisis-ridden Jet Airlways.
An extraordinary general meeting has been called by crisis-ridden Jet Airways today for getting stakeholders' approval for a rights issue, a restructuring exercise that will convert part of the its debt into equity by lenders.
The meeting may also see amendments in the Memorandum and Articles of Association of the company. The changes will allow the struggling carrier to meet its funding gap of nearly Rs 8,500 crore, which is required for its smooth operations, although its promoter Naresh Goyal will have to lose the controlling stake, which at present stands at 51%.
According to the company executives, the agenda for Thursday meeting will be an approval to increase the authorised share capital of the company, which would require a consequential amendment to the Memorandum and Articles of Association of the company. Further, the Articles of Association of the company presently do not provide for the appointment of directors nominated by banks, financial institutions or other financing entities (lenders), as per the terms set out under the financing documents entered into by the carrier company and the lenders. Hence, the requisite changes are expected to be made during the meeting.
Mark Martin, founder & CEO of Dubai-based Martin Consulting, said that a lot will now depend on banks as they get a key role to play while the airline needs to keep running smoothly. "The banks should know that they are getting into," said Martin.
The carrier in a regulatory filing on February 14 said it has approved the bank led provisional resolution plan (BLPRP) in order to meet a funding gap of nearly Rs 8,500 crore. BLPRP will be met by an appropriate mix of equity infusion, debt restructuring, sale/ sale and lease back/ refinancing of aircraft, among other things.
As per the regulations under Reserve Bank of India, such allotment/conversion of lenders' debt to equity shares of the company can be made at an aggregate consideration of Re 1, when the book value per share of a company is negative. A company executive said, "The new equity structure will be depended upon the equity infusion of each participants."
The airline recently had to ground few of its aircraft due to non-payment of dues to the lessors. The financial troubles also forced the airline to halt deliveries of six Boeing 737 Max planes that were due by March.
Last month Etihad Airways had offered to increase its stake from 24%, but sought exemption from market regulator Securities and Exchange Board of India on open offer and preference pricing. As per the regulatory mandate, a company has to make an open offer in case their stakeholding in a listed company goes beyond a certain threshold. This led Jet Airways to respond that the discussions with various investors are still on as part of its turnaround plan.
Jet Airways had been seeking funds from several investors, including Tata Sons, private equity investors and Etihad Airways, in order to make a turnaround.
The company has incurred a loss of Rs 3,208 crore during the nine months ended December 31, 2018, and has a negative net worth of Rs 10,37,024. Also, current liabilities exceed current assets by Rs 9,610 crore as of that date, the Jet Airways records reveal.
CHANGING COCKPIT
- An extraordinary general meeting called by crisis-ridden Jet Airways on Thursday for getting stakeholders' approval for a rights issue
- The meeting may also see amendments in the Memorandum and Articles of Association of the company
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According to the company executives, the agenda for Thursday meeting will be an approval to increase the authorised share capital of the company, which would require a consequential amendment to the Memorandum and Articles of Association of the company. Further, the Articles of Association of the company presently do not provide for the appointment of directors nominated by banks, financial institutions or other financing entities (lenders), as per the terms set out under the financing documents entered into by the carrier company and the lenders. Hence, the requisite changes are expected to be made during the meeting.
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