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Wednesday, 09 January, 2019, 14 : 30 PM [IST]

Banks propose USD900 million turnaround plan for Jet Airways

Local lenders to Jet Airways (India) , led by State Bank of India (SBI), proposed a USD 900 million resolution plan, comprising fresh equity infusion and restructuring of USD 450 million of its loans, two people directly aware of the development said. The Jet Airways’ turnaround plan, if approved by all stakeholders, will trigger a change in Jet Airways’ shareholding, with Naresh Goyal, Founder Chairman, Jet Airways stake falling below the current 51%.

The resolution plan was shared with Jet Airways’ lessors and vendors at a meeting chaired by SBI and attended by the airline’s senior management, including Goyal and a representative of Etihad Airways PJSC, which holds a 24% stake, the people cited above said on condition of anonymity.

“While the finer details are still being worked upon, the broader contours entail that Naresh Goyal and Etihad will together infuse USD 450 million in the company, while the Indian lenders will restructure another USD 450 million of the airline’s debt, which is up for maturity between now and March this year,” said one of the two people cited earlier.

“The final plan will be put in place by the end of January and the lenders are hopeful that the resolution plan will be in force by  March 31 this year, which is well before the 180-day period under the Reserve Bank of India’s (RBI’s) 12 February circular,” said the first person cited earlier.

The  February 12 RBI circular relates to how lenders need to deal with stressed assets. The circular said a resolution professional should be appointed within 180 days for defaulting accounts with aggregate exposure of INR 2,000 crore and above.

Jet Airways defaulted on its debt repayment on  January 1, following which ratings agency ICRA Ltd cut from C to D the long-term rating on loans and bonds issued by the airline, which has reported three consecutive quarterly losses of over INR 1,000 crore each since the quarter ended March 2018.

“The lenders have also assured Jet Airways’ vendors and lessors that their dues will be cleared in three tranches till April, by which time the lenders expect the payment cycle to become regular,” said the second person.

“As part of the restructuring, the lenders have also proposed a moratorium on repayments on loan facilities which are due till April,” the second person said.

Mint reported on  December 7 that Etihad Airways has offered to guarantee loans worth $150 million for Jet Airways to keep the airline operational.

According to estimates, Jet Airways needs close to USD 500 million between now and April to meet repayment obligations and manage operating expenses.
“There is a possibility that Goyal may cede operational control to Etihad, which can increase its stake to 49% under the current regulation,” said the first person cited earlier. Requests for comments sent to Jet Airways and SBI remained unanswered until publishing of this story.

An Etihad Airways spokesperson said the airline “does not comment on rumour or speculation”.

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