Jet Airways to rush in repayment plan after loan recall threat

Troubled Jet Airways will present a repayment plan to its lenders as early as next week, its founder and chairman Naresh Goyal has assured bankers.

Goyal met State Bank of India chairman Rajnish Kumar at the bank's headquarters in Mumbai earlier this week and made this promise, a source familiar with the development said.

Bankers have made it clear to Jet management that they would recall the loans extended to the airline, which is rapidly running out of cash, if they don't get a credible repayment proposal at the earliest, the source said.This will include stake sale or getting a strategic investor on board. Recalling the loans would effectively mean that within a fixed date, Jet would have to repay the debt to the banks or face liquidation. SBI, which has a Rs 2,000 crore exposure to the airline, is the leading the consortium of banks in the negotiations with the airline.

"The pressure is on Goyal to get things moving fast," the source said.

Another possibility is that SBI would convert its debt in Jet to equity. "But this is the last option SBI would consider. It would mean sitting high and dry with the equity," the source said.

Pushed to the wall by the lenders, Goyal has little choice left but to sew up an equity deal quickly to rescue the airline from its grave liquidity crisis. While one option is for Etihad Airways to raise its stake in Jet Airways to 49% from 24%, the other is for the stake sale talks with the Tata Group to restart. Etihad apparently wants Goyal to step down from his management role.

Goyal, who holds 51% stake in Jet, is reluctant to dilute stake at this stage due to low valuations, another source close to the development said. In November, the Tata Group held preliminary talks with Jet.

While Goyal met Kumar this Tuesday, the senior management of the Indian carrier had a separate meeting with lenders, lessors and vendors on the same day to discuss its financial situation and a debt-repayment plan. Jet, which last week said that it had defaulted on a debt payment to a consortium of Indian banks led by SBI, indicated that it would be current on its payments for services beyond April 1, 2019.

Jet has a gross debt of Rs 8,411 crore at the end of September, 2018. Of this, the debt for its aircraft stood at Rs 1,851 crore. The net debt at September 30 stood at Rs 8,052 crore, a reduction of approximately Rs 30 crore over March 2018, and an increase of Rs 690 crore over June 2018. With a major portion of the debt being dollar-denominated, the depreciation of the rupee also impacted the company's closing debt balance by Rs 530 crore due to non-cash mark-to-market.

The company has hired an expert party to help in the sale of aircraft, the monetising of the stake in Jet Privilege loyalty programme and get fresh liquidity infusion from strategic investors. "We are actively pursuing both the transactions and are currently at various stages of discussion with multiple interested parties for both part-stake sale in Jet's business and a fresh infusion of equity into the company," Amit Agarwal, chief financial officer and deputy CEO, Jet Airways, had earlier told analysts.

The aviation market continues to be challenging as ticket prices keep falling irrespective of the movement in crude oil prices. Fuel prices have seen a sharp increase with the Brent price being higher by 51%, at $75 per barrel in Q2 FY2019, compared to $50 per barrel in the same period last year.

GOING DOWNHILL

Bankers have made it clear to Jet management that they would recall the loans to the airline if they don’t get a credible repayment proposal at the earliest