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After months of negotiations, lenders led by State Bank of India are set to take control of debt-laden Jet Airways, with the company board on Thursday approving a bank-led provisional resolution plan.
Under this plan, the SBI-led lenders will convert the debt into 11.4 crore shares for just ₹1. With that, the lenders will become the largest shareholders in the company, with a stake of about 50 per cent.
This comes even as Jet Airways on Thursday posted a loss of ₹587.77 crore for the quarter ended December 31, against a profit of ₹165.25 crore in the corresponding quarter of the previous year. Revenue stood at ₹6,147.98 crore (₹6,086.20 crore).
Higher costs due to the price of Brent crude (up 29 per cent YoY) and the depreciated rupee impacted the airline’s business performance.
Funding gap
Though Jet did not disclose the details of the restructuring plan, it said in a statement the plan proposes a restructuring under the provisions of the RBI in order to meet a funding gap of nearly ₹8,500 crore, which is to be met by a mix of equity infusion, debt restructuring, and sale and lease back of aircraft, among other things.
The plan will now be presented to the consortium of lenders, the Overseeing Committee of the Indian Bankers’ Association, the Etihad Airways board, and Jet promoter Naresh Goyal for approval. Shareholders’ approval for the conversion of lenders’ debt into equity will be taken on February 21.
The plan also envisages the sanction of interim credit facilities by domestic lenders to manage operational exigencies.
According to industry sources, after the restructuring, Goyal’s stake could come down from 51 per cent to 20-25 per cent.
Abu Dhabi-based Etihad may invest ₹1,400 crore and maintain its stake at 24 per cent stake. Else, its stake could come down to 12 per cent.
New ownership?
Analysts said the outcome of the board meeting is positive for Jet though the lenders may not keep control of the company for long. Kapil Kaul, Chief Executive Officer and Director-South Asia, CAPA, said: “I don’t see the lenders running Jet for long; this is an interim arrangement. I expect a new ownership order to emerge in the near term.”
The airline has loans of over ₹8,400 crore, with SBI being its biggest lender with a reported exposure of close to ₹2,000 crore. The airline owes money to its pilots, lessors, banks and vendors.
Commenting on the developments, Vinay Dube, CEO, Jet Airways, said: “ Jet Airways continues to make steady progress on its operational and financial turnaround and, with today’s approval of the bank-led provisional resolution plan by the board of directors of the company, we remain confident of delivering a more strategic, efficient and financially viable airline.”
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