Late last week Jet Airways’ Board of directors approved a Bank led Provisional Resolution Plan (BLPRP), whereby the consortium of lenders led by the State Bank of India will take a 50.1% stake in the company stake for 1 rupee through the issuance of 114 million new shares. The BLPRP needs to be approved by the consortium, founder Naresh Goyal and the board of Etihad Airways, which owns 24%. As mentioned, the deal is expected to be temporary to allow the airline to raise equity from investors. Jet Airways needs a cash equity injection of 85 billion rupees but it also needs to restructure its remaining debt and consider further asset disposals – probably via new sale-leaseback aircraft deals. Once the equity has been secured, the bank share will revert to debt.
The airline says that it will likely receive the requisite approvals from shareholders at the meeting scheduled to be held later this week on February 21, 2019. Once the debt for equity swap has been made, the consortium of lenders will become the largest shareholder and have a seat on the board.
The biggest question is where the fresh equity will be found. Goyal has been muted as being willing to stump up new cash, Etihad will have been contacted again for fresh help, while some sources suggest Indian conglomerate Tata Group could invest – potentially via political persuasion since the fall of a major airline would not be ideal for Prime Minister Narendra Modi, who faces an election this year. India’s National Investment and Infrastructure Fund has also been rumoured to be able to provide as much 13 billion rupees.