When lenders of Jet Airways finally decided to refer the cash-strapped airline to the bankruptcy court on Monday, it capped months of intense negotiations during which the airline had come close to being revived on several occasions.

However, revival efforts floundered over the failure of stakeholders to agree on common terms even as the airline ran out of cash before grinding to a halt.

Around August last year, there were telltale signs of financial distress in the airline. In private, the top management had begun telling employees of an impending cash crunch that they said had left the airline with barely enough cash reserves to sustain operations for a few weeks.

In public, however, founder-promoter Naresh Goyal, who held sway over every aspect of the carrier’s operations, denied reports of a cash crunch, calling them propaganda by vested interests. Goyal, a veteran of many past crises, thwarted efforts by lenders to broker a solution based around Goyal giving up significant control.

Several people close to the discussions recounted that Goyal had several offers on the table and many a time, after showing interest, he would simply increase the asking price, making a deal virtually impossible.

Jet Airways had received serious buyer interest in 2017 when several foreign carriers had shown interest in acquiring it, but Goyal wanted at least twice the prevailing market price," a senior banker who was involved in the discussions told Mint.

Things had changed dramatically in less than a year for Jet. It posted a loss of 636.45 crore in the year ended 31 March 2018 and had a gross debt of 8,425 crore. At the same time, India’s largest airline IndiGo, run by InterGlobe Aviation Ltd, posted a net profit of 2,242.37 crore. “The lenders sensing the gravity began reaching out to potential suitors, who included the Tata, Adani and a few other business groups," said a second person, also a banker. “But the Tatas, wary of Goyal’s continued presence in the airline, made his exit a precondition to which the banks were agreeable. However, things changed when the Tata group began the due diligence process, which threw up potential conflict of interests among stakeholders," the second person said.

The Tatas opted out but said they may come back if Jet were to file for bankruptcy in the future, as it would grant them indemnity from any legal troubles.

With Tata’s exit, the focus shifted back to Jet’s existing shareholders Etihad Airways and Naresh Goyal. In January, local lenders to Jet Airways (India) Ltd, led by State Bank of India (SBI), proposed a $900 million resolution plan, comprising a fresh equity infusion and restructuring of $450 million of its loans.

The turnaround plan, if approved by all stakeholders, would have triggered a change in Jet Airways’ shareholding, with chairman Goyal’s stake falling below the current 51%. However, once again, neither Goyal nor Etihad were willing to make firm commitments.

Etihad had invested in Jet Airways in 2014 but had never got around working smoothly with Goyal. “Like Tata, Etihad too wanted Goyal out and initially offered to provide guarantees for any additional borrowing by Jet, which was by then already in the ICU gasping for breath," said a third person aware of the matter.

However, Etihad dithered on the offer and the promised guarantees never came, leaving the lenders to look for another buyer for the airline through a competitive bidding process. The bidding process received initial interest from some well-known names such as private equity funds TPG Capital and Indigo Partners, but there was no final offer. Etihad which, too, placed a non-binding bid aimed at retaining its stake at the existing 24% made it contingent on the lenders finding an Indian partner for the airline. The lenders finally found some success when the Hinduja group agreed to look at a potential investment.

“The Hinduja brothers, especially Ashok Hinduja, had been on excellent terms with the ruling monarchy in UAE, where it has significant business interests. It seemed like a workable plan," said the first person mentioned above. “Etihad would have invested to retain its 24%, while National Infrastructure Investment Fund (NIIF) in which the UAE government is a shareholder would have bought a 20% stake. The remaining investment was to come from the Hindujas. The talks were progressing well and the group had begun talking to international lenders to raise funds for the investment," the first person said.

However, finally it turned out to be a risky proposition for the Hindujas, too, and the group walked away leaving Jet’s lenders to their own devices.

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