Jet Airways deal likely to be finalised by March; tweaks still being made

Naresh Goyal
A resolution plan for Jet Airways has been delayed over issues linked to due diligence in fresh equity investments, promoters’ interests, lenders’ perspective, regulatory hurdles and government concerns, sources in the know said. Industry watchers are drawing parallels with suspense thrillers while waiting for the “climax or anti-climax’’, as an official put it. 

A board meeting, scheduled for Thursday (February 14), was expected to take up the proposed deal between Naresh Goyal-promoted Jet, foreign partner Etihad and lenders led by State Bank of India (SBI), but now it is learnt that no decision is likely so soon. In fact, the airline’s extraordinary general meeting (EGM) on February 21 may only pass the enabling resolutions, while the specific numbers and architecture of a deal could be worked out later, an official tracking the development pointed out.

“A final decision will take more than two to three weeks,’’ one of the sources quoted above said, indicating a deal would spill over at least middle of March. This is one of those complex transactions to have undergone several changes in the past few months, the source said, adding that the tweaks are still being made. 

Jet did not comment on the matter.

Jet, which has a loan of over Rs 8,000 crore, has run out of funds and needs to be restructured immediately so that it is not dragged to the National Company Law Tribunal (NCLT) for insolvency proceedings. The airline has been facing a funds crunch resulting in delayed salary and vendor payments as well as lease defaults. The airline was also forced by a lessor to ground several planes over non-payment of dues recently, though it has made part payments following a Rs 500-crore cash infusion.

“We will wait for the outcome of the board meeting and the EGM. We hope a decision regarding funding is taken by then," said an executive from Japan’s MC Aviation Partners, which has leased five Boeing 737 planes to Jet. 

Even as an exemption for open offer is seen as critical for a deal with Etihad, capital market regulator Securities and Exchange Board of India (Sebi) is believed to have reservations on the matter. In an informal communication, Sebi has expressed disagreement over exempting Etihad Airways for making an open offer to the minority shareholders of Jet Airways, sources said. Such an exemption could go against Sebi’s takeover norms and might not be favourable for the minority shareholders of the airline, an official had earlier told Business Standard.

Etihad Airways, which holds 24 per cent in Jet at present, may up its stake to around 40 per cent in the airline as per a road map under discussion. Goyal, who holds 51 per cent, is likely to shed a large chunk to bring down his holding to around 20 per cent or so. He will also step down from the board. Lenders may hold around 30 per cent, of which SBI could get 10 per cent. Lenders are planning to convert their debt to equity as well as make fresh infusion. The remaining shares would be with the public. 

A source, however, pointed out that the shareholding structure is still undergoing changes. Goyal and Etihad Airways CEO Tony Douglas recently had a face-off on who would control Jet, through their letters to SBI Chairman Rajnish Kumar. The Jet crisis is playing out at a time when the government does not want another airline to go down, especially when elections are so close.

The Jet restructuring would mean three board seats going to Etihad as it may turn out to be the largest shareholder. Goyal’s family would have just one board seat. His son Nivaan Goyal would be inducted in the board as the father steps down. The lenders would get two board seats. In addition, there will be three independent directors, one of whom will be the board chairman as Goyal steps down.

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