Jet Airways may raise ₹4,000 crore via rights issue if Etihad open offer fails

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Mumbai: Jet Airways (India) Ltd. may consider raising ₹ 4,000 crore through a royalty issue if the Securities Board and India (Sebi) deny an exemption to Etihad Airways PJSC based in Abu Dhabi to make a open offer instead of increasing your offer. Participation in the carrier with cash shortages, said two people with direct knowledge of the matter who requested anonymity.

The promoter and founder of Jet Airways, Naresh Goyal, the lenders of the airline Etihad Airways will subscribe to the issue of rights as part of the resolution plan, said one of the people cited above.

The provisional debt resolution plan led by the banks, approved by the board of Jet Airways, proposes a restructuring in accordance with the provisions of the RBI to cover a financing gap of almost R $ 8,500 million. The gap will be covered through a combination of capital infusion, debt restructuring, sale, sale and lease (SLB) and refinancing of aircraft, among others.

At an extraordinary general meeting (EGM) on February 21, Jet Airways shareholders will vote on a proposal to increase its authorized capital stock from ₹ 200 crore to ₹ 2,200 crore through a special resolution. The Jet Airways proposal also contains a plan to grant lenders the right to nominate one or more members on the airline’s board, after converting the debt into equity.

Etihad could consider the subscription jointly or individually, said the second person.

Jet Airways did not respond to inquiries sent by email.

The Mumbai-based airline last week approved a rescue plan that would allow its domestic lenders, led by the State Bank of India (SBI), to convert their loans into equity, which makes them the airline’s largest shareholders. cash problems.

The decision to raise funds through rights issues comes after domestic lenders decided to convert the existing debt into 114 million shares at a price of 1R according to the rules of the Reserve Bank of India (RBI).

After the conversion of the debt, the lenders will obtain a participation of more than 50% and the participation in the capital of Goyal and Etihad will be reduced by half to 25% and 12%, respectively. Goyal and Etihad currently have 51% and 24% holdings in Jet Airways, respectively.

The airline had said it is working on a comprehensive resolution plan for a shift towards sustained growth and the restoration of financial health. He added that the resolution plan “contemplates several options in the debt-capital combination, the proportion of the injection of capital by the various stakeholders, and the consequent change in the composition of the company’s board of directors.”

The lenders are also considering converting existing debt of ¥ 1,000 crore into stock-type products through cumulative exchangeable preferential shares, which will be paid over a 15-year period, said one of the people mentioned above.

“The lenders will infuse these additional funds on a pro-rata basis, and the company will raise an additional 2,000 crore through the sale and repurchase of aircraft leases,” the person said.

Jet Airways has been battling cash flows for the past six months due to rising fuel costs and intense competition. The cash crisis forced the airline to delay pilots’ salaries and interest payments on their debt.

“Banks will not become promoters (of Jet Airways),” CFO Amit Agarwal said during a visit by analysts.

The general director of the airline, Vinay Dube, said that Jet Airways will continue to be a professional company where management informs the board of directors. The company, which has delayed payment of fees to several of its lessors and suppliers, hopes to mitigate the situation in the coming days.

Etihad had previously offered to buy Jet shares with a 49% discount (£ 150 per share) and rescue the carrier. Etihad executive director Tony Douglas had written on January 15 to the lenders led by SBI about the possibility of increasing their participation.

However, Etihad wants the Jet Airways founder and president, Goyal, to resign the board and reduce its 51% stake to 20-22%.