SBI-led consortium of lenders likely to bag biggest stake in Jet Airways

Even as the talks between Jet Airways and its lenders are learnt to have reached a stage of finality, the Naresh Goyal-led company issued an official statement to scotch any speculation around its foreign partner Etihad offering to raise its stake at a steep discount.

The statement, which came after the airline stock fell 7.95 per cent, closing at Rs 271 on the BSE, confirmed that the resolution plan was considering various options on the debt-equity mix, proportion of equity infusion by stakeholders and the consequent change in the composition of the company’s board of directors.

Off the record, sources gave out details that indicated that the consortium of Jet lenders led by the State Bank of India (SBI) would be largest shareholder in the airline post restructuring. At this stage of negotiation, it looks like the SBI-led consortium will hold around 40 per cent, while Etihad’s stake could go up by 2 to 3 per cent, an executive of a bank with exposure to Jet Airways said. Founder chairman Goyal’s stake could possibly fall to around 24 per cent. Currently, Goyal owns 51 per cent and Etihad 24 per cent stake in the airline.

A meeting was held between banks and airline executives on Wednesday to discuss the fundraising options.

Another sticky issue that is being addressed is that of an open offer. An official tracking the Jet developments said if there’s a change in the ownership structure and the Goyal family ceases to be classified as promoter of Jet Airways, an exemption from open offer can be granted.

This is because such a change in the ownership structure can be viewed as reconstruction of the company, prompting an exemption from open offer.

However, a final call on this will have to be taken by the Securities and Exchange Board of India (Sebi), the official said.

“There have been previous cases where the Sebi has granted exemption for an open offer if a case is made out by a company,” said R S Loona, managing partner of Alliance Law. In the case of Spicejet takeover, an open offer exemption was granted after the DGCA approved the deal and allowed Ajay Singh not to make an open offer. “The idea is to protect the minority shareholders. if the company shuts down, it will not help anyone,” said Loona.

But the regulatory approvals for any exemption from the civil aviation ministry may be delayed as secretary Rajiv Nayan Choubey is due to retire in the next 15 days. “There is a confusion over the authority of Ministry of Civil Aviation to recommend such an exemption which was given to SpiceJet. The secretary may not want to take such a controversial decision,” the official said.

From the bankers’ side too, conditions are being set. For instance, lenders may want board seats in Jet Airways after the restructuring of their debt. They are also learnt to be insisting on a personal guarantee from Goyal and restructuring of overseas bonds.

The fact that the forensic audit by EY is yet to be circulated among all the stakeholders including the lenders is also slowing things down, sources said. The audit, while pointing out minor diversions, did not indicate any criminal offence in relation to funding, they added.

Recent reports suggested Etihad had laid down stiff conditions for additional equity infusion. These include share subscription at Rs 150 apiece, stripping Goyal of his powers and waivers in open offer and preferential allotment norms. The reports. which quoted Etihad chief executive Tony Douglas’ letter to the SBI, also warned that financial condition of Jet was grim and it would run out of funds in a week's time. Etihad would also have the right to appoint a CEO at the airline, which is valued at Rs 3,078 crore as per stock's closing price on Wednesday.

While the Jet statement said the resolution plan was under active discussion among stakeholders and proposals were yet to be crystalised, Etihad refused to comment on speculation.

Besides Etihad, lenders too are pressurising Goyal to give up control of the airline which he founded 25 years ago. Goyal and his wife Anita hold positions on the board and both would be asked to step down, it is learnt. Goyal's son Nivaan may be given a board position with nominees of Etihad and banks taking additional positions.

Jet has a loan repayment of Rs 1,700 crore due by March end. This includes $ 150 million (around Rs 1050 crore) loan raised from various banks in West Asia in 2014.

The airline has struggled to pay salaries and vendors on time and its Rs 10,963 crore fund and non fund based facilities have now been assigned 'D' rating by ICRA. This is the seventh rating downgrade since March 2017.