Naresh Goyal, the Promoter and Chairman of Jet Airways along with his wife, Anita Goyal has stepped down from their positions in the board.
READ: Statement from Jet Airways
Naresh Goyal will also cease to be the Chairman of the Company. Along with the Goyals, another board member nominee on behalf of Etihad Airways has also resigned.
A board meeting was held on Monday where it was decided that equity shares of Lenders' debt worth Rs 11.4 crore will be converted at Rupee one each. The bidding process will be initiated by lenders for sale or issue of shares to new investors by the June quarter. In addition, an interim funding of Rs 1500 crore will be pumped in by lenders.
BusinessLine on Sunday, had reported that this week Jet Airways lenders could invite expressions of interest from investors (EoI) for those who are willing to acquire a stake in the debt-strapped airline.
Goyal's stake
Goyal's stake will be cut to 25.5 per cent from the current 51 per cent, while Etihad Airways' stake in the debt-laden carrier will also be halved to 12 per cent to make room for the banks to take a controlling stake of 50.5 per cent in the airline, according to the company's statement.
Saddled with debt of more than $1 billion, Jet owes money to banks, suppliers, pilots and lessors - several of whom have started terminating leases with the carrier.
The government has asked state-run banks, led by SBI, to rescue Jet without pushing it into bankruptcy, two people within the Indian government have told Reuters that Prime Minister Narendra Modi seeks to avert thousands of job losses weeks before a general election.
The reports of Goyal's departure led to a rally in Jet's shares of more than 12 per cent.
Industry Reaction: Sad day for Indian aviation: SpiceJet chief
Goyal’s exit paves the way for the company’s lenders led by State Bank of India to bring in a new investor. SBI Chairman Rajnish Kumar told BusinessLine : “We will run the process to invite Expression of Interest. The last date for EoI will be April 9. One month’s time for conducting due diligence will be allowed. Since we have put in a lot of effort in putting together the resolution plan, all that the buyer needs to do is validation.”
The majority shareholders
The board of directors of Jet Airways on Monday approved the lenders debt into equity by the issuance of 11.4 crore equity shares for ₹1. Market capitalisation of Jet Airways is around ₹2,900 crore. Banks’ are taking 50 per cent stake in the airline. So, the value of banks’ stake is around ₹1,500 crore. With this, the consortium of lenders will become the majority shareholders.
Kevin Knight, nominee director of Etihad Airways, has also resigned from the board. Instead two lender nominees will be inducted. The two nominees of the promoter group and one nominee of Etihad Airways will continue on the board.
As part of the resolution plan, the lenders will provide an immediate interim funding support of ₹1,500 crore to Jet Airways. This will be used to partly clear pending dues towards lessors, vendors, creditors and employees in a phased manner.
An Interim Management Committee has been constituted to oversee the overall financial and operational performance of the airline with the support of McKinsey & Co. The lenders will now begin the process of sale to new investors, which is expected to be completed in the June quarter. “All the shares of Jet held by Etihad, Goyal and lenders will be kept in a common (escrow) account. Post the restructuring, Goyal’s holding will be less than 10 per cent,”said a banking industry source.
The open bidding process could open up avenues for several strategic investors like IndiGo and SpiceJet to invest in the airline along with existing prospects like Etihad and Tatas.
Meanwhile, Ajay Singh, Chairman and Managing Director of SpiceJet said “today is indeed a sad day for Indian aviation...this is also a wake-up call for Indian policy makers. We urgently need to address structural challenges that make India’s airlines uncompetitive to airlines around the world.”
Additional reports from agencies
Financial Woes
As Jet Airways battles acute financial woes, a senior government official Monday said a “good outcome” from the negotiations between the creditors and the company would be better than moving for proceedings under the insolvency law.
“I think creditors and the debtor are in discussion. That is the best process,” Corporate Affairs Secretary Injeti Srinivas said.
He was responding to a query on whether Jet Airways is a fit case to be referred under the Insolvency and Bankruptcy Code (IBC).
“If there is a good outcome from the negotiations between the creditors and the corporate debtor, then that is better than dragging into insolvency but if that (insolvency) is only option left at that stage, then bankers will take a call,” he noted.
The cash-strapped airline, which has been operating for over 25 years, is looking to restructure its debt, estimated to be more than Rs 8,000 crore, as well as raise fresh funds.
Lenders of the crisis-hit Jet Airways are likely to acquire a substantial stake in the carrier till a new promoter is roped in, sources said last week.
Noting that the IBC is the last resort, Srinivas said that if there is inherent capacity for a company to bounce back, then it is best for members of the company and the creditors to try and see how it can be resolved.
“If there is no agreement between the creditors and shareholders, then you will have to look at other possibilities, including that of the IBC,” he said.
He was replying to a query regarding Jet Airways on the sidelines of a conference organised by Confederation of Indian Industry (CII).