Debt-ridden Jet Airways may consider a rights issue to raise Rs 4,000 crore if market regulator Securities and Exchange Board of India (SEBI) doesn’t exempt Abu Dhabi-based Etihad Airways from making an open offer in lieu of raising its stake in the carrier, sources told Mint.
As part of the resolution plan for Jet Airways, founder Naresh Goyal, Etihad Airways and the lenders to the carrier will subscribe to this rights issue, sources added.
Lenders to Jet Airways had prepared a debt resolution plan, which proposed restructuring under provisions laid down by the Reserve Bank of India (RBI), to close a funding gap of Rs 8,500 crore. The same has been approved by the airline’s board. This will be done through an equity infusion, debt restructuring, sale and leaseback (SLB) and refinancing the aircraft, the report said.
On February 21, shareholders of the cash-strapped airline are scheduled to meet for a general meeting (EGM) to vote on a proposal to increase its authorised share capital from Rs 200 crore to Rs 2,200 crore through a special resolution. This resolution seeks to provide Jet Airways’ lenders a right to nominate at least one member on its board after the conversion of debt into equity.
The second person told the paper that Etihad Airways could subscribe either jointly or individually.
Jet Airways recently gave its nod to the bailout plan where its lenders, led by State Bank of India (SBI), can convert their loans into equity, thereby making them the airline’s largest shareholder. The report stated that the decision to turn to a rights issues comes after the banks decided to convert their debt into 114 million shares at a consideration of Re 1 in line with RBI norms.
Banks will hold over 50 percent stake and the holding of Goyal and Etihad will halve to 25 percent and 12 percent, respectively.
The airline said it is working on a comprehensive resolution plan towards a turnaround, adding that “it has contemplated various options on the debt-equity mix, proportion of equity infusion by the various stakeholders and the consequent change in the composition of the company’s board of directors.”
A source told the newspaper that banks may convert existing debt of Rs 1,000 crore into equity type products through redeemable preference shares, which will be repaid over 15 years. “Lenders will infuse this additional funds on a pro-rata basis. The company, on the other hand, will raise an additional Rs 2,000 crore through sale and lease buyback of aircraft,” they added.
Rising fuel costs and intense competition in the aviation sector has taken a toll on the Mumbai-based airline for the past six months.