The plan includes an equity infusion of ₹3,800 crore by two unidentified investors and a ₹850 crore equity infusion by state-run lenders led by SBI, ₹485 crore on behalf of public shareholders that will be achieved through banks underwriting a rights issue, additional debt of ₹2,400 crore and non-fund based facilities of ₹2,000 crore, according to the plan reviewed by Mint.
The resolution plan also proposes a complete exit of Abu Dhabi-based Etihad Airways, as well as large haircuts for lenders, including a write-off of debt by the domestic lenders to Jet Airways.
Last month, the lenders committed a fund infusion of ₹1,500 crore, which was conditional on the resignation of Goyal from the board. A shutdown of Jet Airways and consequent job losses would have been a setback for the Narendra Modi administration, ahead of national polls.
According to the new plan, both Goyal and Etihad will transfer all their shares, 51% and 24% stakes, respectively, in the airline to an independent trust managed by trustees, who will be appointed by the lenders. The trustees will have a call option on the shares owned by the trust at ₹150 apiece. The resolution plan is subject to approval by various stakeholders.
A call option is a pact between two parties wherein the buyer earns a right to exercise the option to purchase a particular asset from the call option seller within a set period of time. Once the buyer exercises the option, the seller has to sell the asset at the originally agreed price.
After the shares of Jet are placed in a trust, an issuance of new capital in the form of an equity infusion of ₹5,135 crore through a rights issue at ₹150 per share will take place, which will see participation from two unidentified investors that will invest ₹1,700 crore and ₹2,100 crore, respectively, according to the details of the plan.
Following this, the domestic lenders will write off debt worth ₹2,600 crore, while foreign lenders led by Dubai-based Mashreq Bank and HSBC will take a total haircut of ₹1,170 crore. The resolution plan believes that Jet’s lenders will still make a gain of ₹2,636 crore on the assumption that Jet’s share price will rise to ₹300 by March 2022. There will not be any write-down by any of the airline’s lessors and creditors. The resolution plan estimates an overall need of ₹10,645 crore to sustain Jet’s operations, including ₹4,094 crore overdue to creditors, an estimated loss of ₹2,700 crore, settlement of unsecured dues worth ₹1,170 crore to HSBC, Mashreq, etc., cash balance requirement of ₹1,248 crore and paying ₹1,433 crore to the US Exim Bank. To be sure, the estimated loss could be more as the airline has grounded dozens of planes, which has affected its operations.
The resolution plan aims to meet Jet’s needs through the new cash equity infusion of ₹5,135 crore, refinancing of aircraft loans and additional secured facilities worth ₹2,400 crore for 10 Boeing 777s, cash receivables by the International Air Transport Association of ₹725 crore, sale and leaseback of at least three Airbus A330 planes and ₹2,000 crore in non-fund based facilities. In doing so, the proposed exposure of lenders to Jet will increase by ₹3,081 crore to ₹8,859 crore.
After the conversion of the loans into equity, lenders will be allotted 114 million shares of the airline equivalent to a 50.1% stake in the firm. The trust that will subsume shares of Goyal and Etihad will hold 37.4%, with public shareholders holding the remainder.
Once the trust sells a part of these shares and the rights issue takes place that will induct two new shareholders, the structure of the company will change. The two new investors will hold stakes of 19.9% and 24.6%, respectively, in the airline. The holdings of the banks, public shareholders and trust will reduce to 29.9%, 10.7% and 14.9%, respectively.
Emails seeking comments from Jet Airways, Mashreq, HSBC and SBI remained unanswered till press time. An Etihad spokesperson said the airline “continues to work closely with lenders, Jet management and key stakeholders to facilitate a solution for Jet Airways".