Lenders propose new plan to keep troubled Jet afloat

New Delhi|Mumbai: Lenders to Jet Airways are proposing a new plan that will fund the stricken airline through a rights issue with existing promoters and partners renouncing a portion of their stake in favour of new investors.Under the proposal, which is being discussed internally, the airline will raise Rs 5,135 crore through equity infusion by two new investors. The National Investment and Infrastructure Fund (NIIF) is likely to be one of them. Existing equity holders like Etihad and banks, and possibly Naresh Goyal and his family, will renounce a portion of their rights for the new investors. 68663276 The banks are also proposing that the remaining shareholding (after renunciation possibly) of Goyal and Etihad be transferred to a trust managed by lenders with a call option on shares owned by the trust. The resolution plan proposed by the lenders is being discussed and ET has seen a copy of it.Etihad won’t invest more in airlineAs part of the funding plan, finalised by lenders, the two investors will invest Rs 1,700 crore and Rs 2,100 crore respectively. Lenders will put in Rs 850 crore and the rest Rs 485 crore will come from public shareholders. The rights issue will happen at Rs 150 per share.Emails sent to SBI and Jet Airways did not elicit any response till the time of going to print.Etihad, which is expected to renounce its rights, decided on Sunday that it is no longer interested in increasing its stake in the beleaguered airline. “As always, Etihad continues to work closely with lenders, management and key stakeholders to facilitate a solution for Jet,” said a spokesperson at Etihad.Jet’s lenders had given Etihad until March 31to exercise a right of first refusal if a new investor were to come in or rework on their original offer and give a final decision on Jet. The date lapsed on Sunday and Etihad has decided against any fresh investment in Jet Airways, clearing the way for a new investor.“Etihad has decided not to go ahead with further investment in Jet and that they will give up their shares. Today was the last day to decide. Meanwhile, Jet’s lenders have appointed SBI Capital Markets to go ahead with the rights issue and the sale. There is no more time left,” said a person close to the development.The interim funding plan is a change from the previous plan which only called for a stake sale to a strategic investor. Banks were supposed to ask for bids from prospective investors by April 9 and decide on the winner some time in June.The new plan envisages a different form of funding that will also lead to a change in ownership of Jet. The Tata Group is said to be openly looking at putting in bids for the airline as that would give Vistara a huge advantage in their expansion plans. Vistara is a 51:49 joint venture between the Tata Group and Singapore Airlines.Call option“The trust can exercise the call option at Rs 150/share plus 8 per cent per annum carry. Trust will pass the proceeds received from the sale of shares or exercise of the call option to Goyal and Etihad,” reads the draft resolution plan.Jet Airways, which is going through its worst financial crisis and was on the verge of a closure, was taken over by banks that now own 50.1 per cent in the airline, at a token amount of Rs 1. The banks have also extended borrowings of Rs 1,500 crore to the airline that will help stabilise operations.The plan projects that banks will own 29.9 per cent in Jet after the rights issue. The investor, who puts in Rs 1,700 crore, will own 19.9 per cent while the other with an investment of Rs 2,100 crore will be a 24.6 per cent owner. Public ownership will be at 10.7 per cent, whereas the trust — ownership of Goyal and Etihad — will be at 14.9 per cent.The airline’s liability, which includes funding of cash losses, cash balance and payments to foreign lenders and other creditors, will be around Rs 10,645 crore. The plan is to fund the liabilities through the infusion of funds, refinancing of aircraft loans and additional secured facilities and non-financial borrowings of Rs 2,000 crore.Domestic lenders will also write down debt of Rs 2,600 crore and foreign lenders will take a haircut of Rs 1,170 crore, lists the plan without getting into the details.Jet, which was down to operating only 35 aircraft from a peak of 124 operational aircraft, has assured the government that they will be back to operating 75 aircraft by the end of April.An attempt by the airline to make its pilots and engineers work beyond April 1, 2019, despite nonpayment of salaries has failed to work and the airline is considering paying salaries partially.Industry experts said that payment of salaries should be the first thing that the new owners should do as that would bring in normalcy and ensure the most important stakeholders such as staff stay engaged.In 2014, when SpiceJet was going through turbulent times, the Marans — the then owners of SpiceJet — had one clear instruction for Sanjiv Kapoor, the then COO of the airline: whatever happens, pay the staff first.As a result, the maximum salary delay was two weeks, which kept the employees engaged, even when the Directorate General of Civil Aviation had banned forward bookings, an act that took the airline to the brink.

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