HEADLINES:
December 15 2019
Lenders mull Jet rescue act
18 January 2019

Promoter, Etihad lock horns; Goyal makes ₹700-crore offer

Lenders of Jet Airways (India) Ltd., with an exposure of about ₹8,000 crore to the financially-challenged airline, are believed to have assumed the lead role in the resolution process as the two main shareholders — Jet Airways founder and chairman Naresh Goyal with 51% stake and Etihad Airways with 24% holding — seem to have put tough conditions for recapitalisation of the airline.

On Wednesday, Jet Airways admitted to the ongoing resolution process and indicated that there could be restructuring in shareholding pattern and composition of the board post the restructuring.

Some media reports on Thursday, quoting a letter by Etihad Airways to the State Bank of India (SBI), the lead bank of the consortium of lenders, stated that Etihad wanted the complete exit of Mr. Goyal and family in running the airline and his stake to be capped at 22%.

The reports also said that Etihad was not willing to pay anything more than ₹150 a share for further investing in Jet Airways and had sought an exemption from SEBI in making the mandatory open offer in case of a stake hike.

When contacted, an Etihad spokesperson said, “Etihad does not comment on rumours or speculation.”

Responding to the reports, an SBI spokesperson said on Thursday, “We have seen some media reports on certain issues concerning a resolution plan for Jet Airways. This includes speculative reports on pricing relating to any possible investment in the company.

‘For long-term viability’

“In this connection, SBI would like to state that lenders are considering a restructuring plan under the RBI framework for resolution of stressed assets that would ensure a long-term viability of the company,” a SBI spokesperson said.

“Any such plan would be subject to approval of boards of the lenders and subject to adherence and clearance, if required, from the RBI and / or SEBI (takeover code, ICDR regulations etc.) and/or Ministry of Civil Aviation and in compliance with all regulatory prescriptions,” the spokesperson added.

On Thursday, Mr. Goyal wrote a letter to the SBI expressing his willingness to infuse ₹700 crore in the airline subject to his stake not going down below 25%.

In a clarification issued to the stock exchanges, Jet Airways said, “As part of a continuous engagement with SBI, Mr. Goyal has communicated his position to the SBI which is under consideration.”

Analysts said SEBI may not be able to accommodate Etihad’s demands for relaxation in mandatory open offer norm and the pricing demanded by the carrier was also unreasonable.

“The banks [seem] to have assumed central role and [are] calling the shots at Jet Airways. Mr. Goyal is pleading with them not to bring down the stake below 25%. Etihad seems to be asking for too much, it may soften stance later,” said Ansuman Dev, analyst, ICICI Securities.

Asking not be named, another analyst said, “Banks will convert part of the loan into equity and will pick up a stake in the airline. Etihad will be allowed to increase its stake to up to 49% beyond which it can not go. In the process, Mr. Goyal’s stake will be reduced substantially and may come down to 10% to 15% if he does not infuse significant money.

“Banks will lend more and effectively control the airline with a professional management aided by Etihad. Including the banks, public shareholders and Mr. Goyal, effective control will remain with Indians and who manages day-to-day operations is immaterial as long as the airline makes a turnaround,” the analyst said.

 

 

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