With the board of the cash-strapped Jet Airways approving a lender-led resolution plan yesterday, which entails a debt-to-equity swap, the carrier's promoter Naresh Goyal will no longer be in the pilot's seat. In fact, the consortium of banks led by SBI will hold the largest stake in India's second-largest airline should the plan get the shareholders' nod next week.
"The BLPRP [bank-led provisional resolution plan] currently estimates a funding gap of Rs 8,500 crore (including proposed repayment of aircraft debt of Rs 1,700 crore) to be met by appropriate mix of equity infusion, debt restructuring, sale/sale and lease back/refinancing of aircraft, among other things," the airline said in a filing to exchanges. The plan contemplates conversion of lenders' debt into 11.4 crore shares of Rs 10 each by allotment of equity shares to the banks, which will also pave way for the appointment of the latter's nominees to Jet's Board of Directors.
"Such allotment of 11.4 crore shares will be made at an aggregate consideration of Rs 1 since under the RBI circular, lenders can convert debt into equity at Rs 1 when the book value per share of a company is negative," Jet added. It is still unclear how the deal will eventually be structured but the plan will have to be approved at the extraordinary general meeting that Jet Airways has called for on February 21. Moreover, the rollout will also need approval from the Securities and Exchange Board of India and the Ministry of Civil Aviation.
"Naresh Goyal's share will come down to 25.5%, Etihad to 12% [from 24% currently] and lenders will have a majority stake of 50.1%," SBI Caps reportedly said in a note. "While this will effectively transfer control of the airline to lenders, the press release is silent on how much of the debt will be converted under the exercise, which remains a key unknown for now, and also who is to bring in potential equity funding that is required to sustain operations and deliver a turnaround."
According to The Economic Times, Goyal, who founded the airline in April 1992, could even see his stake dropping to as low as 20% from 51% currently while Etihad Airways - along with a partner - may subscribe to fresh shares issued by Jet and increase its stake to 45%, thus becoming the biggest shareholder eventually.
Meanwhile, the beleaguered airline also posted its fourth consecutive quarterly loss in the December-ended quarter - it reported a net loss of Rs 732 crore yesterday - against a net profit of Rs 186 crore in Q3FY18 - and blamed higher oil prices and strong competition at home. These figures only underscore the pressing need for the resolution plan. The BLPRP also envisages sanction of interim credit facilities by domestic lenders and the buzz is that the airline might bag a Rs 600 emergency loan soon.
The shareholders' meet will also increase Jet's authorised capital. The airline reportedly aims to increase authorised share capital to Rs 2,200 crore. This would include Rs 680 crore of equity capital and Rs 1,520 crore of preference share capital. Citing analysts the daily added that the debt conversion and the consequent increase in share capital may lead to a share price dilution of more than 20%, bringing it to around Rs 150, which is the price point at which Etihad wants to invest in the airline.
Jet Airways' shares are currently trading at Rs 239.25 apiece, up over 5% from the last close on news of the board's approval for the resolution plan.
With PTI inputs