The banks-led provisional debt resolution plan, approved by the Jet Airways board, proposes restructuring under provisions of the RBI to meet a funding gap of nearly ₹8,500 crore. The gap is to be met through a mix of equity infusion, debt restructuring, sale, sale and leaseback (SLB), and refinancing of aircraft, among others.
In an extraordinary general meeting (EGM) on 21 February, shareholders of Jet Airways will vote on a proposal to raise its authorized share capital from ₹200 crore to ₹2,200 crore through a special resolution. The proposal from Jet Airways also contains a plan to give lenders the right to nominate one or more members on the airline’s board, post conversion of debt into equity.
Etihad could look at subscribing either jointly or individually, the second person said.
Jet Airways did not respond to emailed queries.
The Mumbai-based airline had last week approved a bailout plan that would allow its domestic lenders, led by State Bank of India (SBI), to convert their loans into equity, making them the largest shareholders of the cash-strapped airline.
The decision to raise funds through rights issues comes after the domestic lenders decided to convert existing debt into 114 million shares at a consideration of ₹1 according to Reserve Bank of India (RBI) norms.
Following the debt conversion, lenders will pick up more than 50% stake and the equity holding of Goyal and Etihad will halve to 25% and 12%, respectively. Goyal and Etihad currently own stakes of 51% and 24% in Jet Airways, respectively .
The airline had said it is working on a comprehensive resolution plan towards a turnaround for sustained growth and restoration of financial health. It added that the resolution plan “contemplates various options on the debt-equity mix, proportion of equity infusion by the various stakeholders, and the consequent change in the composition of the company’s board of directors".
The lenders are also looking at converting the existing debt of ₹1,000 crore into equity type of products through cumulative redeemable preference shares, which will be repaid over a period of 15 years, said one of the persons mentioned above.
“Lenders will infuse this additional funds on a pro rata basis. The company on the other hand will raise additional ₹2,000 crore through sale and lease buyback of aircraft," the person said.
“Banks will not become promoters (of Jet Airways)," chief financial officer Amit Agarwal said during an analysts call.
The airline’s CEO Vinay Dube said that Jet Airways will remain a professionally-run company where the management reports to the board of directors. The company, which has delayed payment of dues to several of its lessors and vendors, hopes to mitigate the situation in the coming days.
Etihad had earlier offered to buy Jet shares at a 49% discount— ₹150 per share—and bail out the carrier. Etihad’s chief executive officer Tony Douglas had on 15 January written to SBI-led lenders about the possibility of increasing its stake.
Etihad, however, wants Jet Airways’ founder and chairman Goyal to step down from the board and his stake to reduced from 51% to 20-22%.
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