Jet Airways is Likely to Receive Fund Infusion worth over Rs 3,000 Crore Post Debt-Rejig

On February 14, Jet Airways' board approved a Bank-Led Provisional Resolution Plan (BLPRP), whereby lenders would become the largest shareholders in the airline.
Jet Airways is Likely to Receive Fund Infusion worth over Rs 3,000 Crore Post Debt-Rejig

Loss-making Jet Airways is likely to receive fund infusion worth over Rs 3,000 crore post-debt-rejig and investments by Etihad Airways as well as National Investment and Infrastructure Fund (NIIF) while founder Naresh Goyal might remain the promoter with less than half of the existing majority stake of 51 percent, according to sources.

While the final contours of debt-restructuring and consequent changes are being worked out, an analyst said that Etihad Airways should come as the main driver for Jet Airways as lenders and shareholders would not be able to bring in much value addition.

Abu Dhabi-based Etihad, which currently owns 24 percent in the full-service carrier, is a strategic partner and is probably to pump in around Rs 1,400 crore, sources said.

On February 14, Jet Airways' board accepted a Bank-Led Provisional Resolution Plan (BLPRP), whereby lenders would become the largest shareholders in the airline.

After receiving sanction from shareholders, during their meeting planned for February 21, part of debt would be changed into 11.4 crore shares at the contemplation of Re 1 apiece as per RBI norms.

Later, suitable interim credit amenities by domestic lenders would be authorized to the airline, as per an authoritarian filing made on February 14.

The government-backed NIIF, where Abu Dhabi Investment Authority is a key stakeholder, is likely to acquire a little over 19 percent stake in the poorly airline, they added.

They said that NIIF is likely to put in Rs 1,400 crore while lenders, led by the State Bank of India (SBI), are predictable to convert debt into equity worth around Rs 600 crore.

Sources also said that Etihad's designed treasury would hike its stake only somewhat and that would not trigger the state for creating an open offer for shareholders of Jet Airways under Sebi system.

Together, the fresh backing for the airline would amount to about Rs 3,400 crore and Goyal's stake could reduce to 20 percent from 51 percent at present, sources said.

Queries sent to Etihad Airways and NIIF on their proposed investments in Jet Airways remain unrequited.

Query sent to Jet Airways about Goyal's stake coming down to around 20 percent after debt-rejig did not elicit any instant response.

In the three months ended December 2018, Jet Airways reported a consolidated net loss of Rs 732 crore.

Deepak Jasani, Head of Retail Research at HDFC Securities, said Etihad should come as the main driver of the company and they have to propose their main people to run the airline because lenders and shareholders are not going to bring in much value adding.

Noting that it is an irretrievable situation under the current promoters, Jasani told that who would be the operational owner of the airline would be the most crucial part.

"Somebody who has the know-how and equity stake has to come. Only then this can be revived. Otherwise, we are postponing the problem by a couple of years… If you are not changing the management, then we are going to stay where we are. The same problem will come again," he said.

V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said the reformation exercise is likely to steer Jet Airways away from the turbulence it has been going through for many years now.

"The SBI-led grouping of bankers who will be becoming the largest shareholders after the exchange of debt into equity can manage the transition of management over to Etihad plus another partner eventually," he noted.

Jasani noted that he thinks a lot of things would not be disclosed to the public in the current deal. "At the government and narrow levels, they may have been sounded off on the final contours. We have to see whether political issues crop up, whether the opposition has an objection… we will have to see many factors," he added.

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