Jet Airways lenders are meeting on Thursday to vote on a resolution plan that will see lenders holding 51% stake in the airline as part of the debt gets converted into equity in the first stage of restructuring exercise to rescue the cash-strapped airline, a senior banker familiar with the development said.
In the second stage, the lenders' stake will come down to about 30% after the right issue of Rs 3,000 crore, which will see Etihad's stake going up to 40% and Naresh Goyal's shareholding falling to 22%. "But Goyal will also continue to have management control in the airline," said a banker.
The lenders' meet follows the extraordinary general meeting (EGM) of the airline on February 21, which discussed and passed resolutions allowing banks to acquire a majority stake. However, shareholders complain that the restructuring package was not discussed in detail.
The resolution plan, in line with the February 12 circular of Reserve Bank of India which will give the airline a 270-day deadline to restructure the debt, will see Rs 800 crore getting converted into equity. Banks are also writing off around Rs 800-1,000 crore of debt, a source said. Lenders will nominate one or two directors on the Jet Airways's Board.
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 a 40-46% stake in Jet.
Arvind Gupta, a shareholder of both State Bank of India and Jet Airways said, "The government should rescue the airline like they did for IL&FS. Banks are dealing with public deposits and have no experience in running the airline; so it should be a government-led rescue plan." He added that airline had losses of Rs 3,656 crore up to September 2018.
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.
The interim funding to run the airline till the rights issue is complete will be arranged by the 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.
Earlier this month, Jet Airways 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 a 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 SBI 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
STAYING AIRBORNE
- Rs 800 crore – Debt is likely to get converted into equity as per the resolution plan
- Rs 8,052 crore - Jet Airways's debt as on September 30, 2018
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