Jet Airways revival: Etihad offer hinges on Rs 9,000-cr debt write-down

Jet lenders find there's no binding bid

Etihad Airways has put in stiff conditions, which include a substantial write down of the Rs 9,000-crore loans, as a prerequisite to run Jet Airways. The Abu Dhabi-based airline has also put the onus of finding a majority investment partner on the Jet lenders. 

Etihad, which holds 24 per cent stake in Jet, submitted its offer last Friday just before the window closed for binding bids. SBI Capital Markets, the merchant banker for the transaction, opened the offer on Monday to find there’s no binding bid, and only a letter of  interest, sources in the know said. This has prompted bankers to think in terms of moving the National Company Law Tribunal (NCLT), though there was hope on Friday after Etihad submitted its offer. 

A senior banker involved in the deal said, “Etihad’s offer had renewed hope for revival. But there are so many conditions that it can’t be taken as a binding bid. There is little meaning to the letter of interest. They may probably want to negotiate further.” 

However, a State Bank of India (SBI) executive said it’s too early to comment on the outcome. 

“The due diligence has begun and we will come to know in two to three days. They (Etihad) have said certain things. We will decide on what process to follow and how to respond. Hope is not lost.” 

Another bankers pointed out that the airline has not specified how much haircut lenders should take. But, it has sought substantial write-off to reduce the burden on airline to service debt as and when it becomes ready to fly after restructuring. 

It has reiterated its demand for exemption from the open offer. With the possibility of the Jet account becoming non-performing asset, many banks (SBI, Canara, ICICI Bank, Syndicate and Yes Bank) have already made provisions for bad loan in the fourth quarter of 2018-19. Others lenders are likely to do the same. The total dues to lenders are pegged at more than Rs 9,000 crore. 

When contacted, Etihad Airways confirmed its interest to re-invest in a minority stake in Jet, subject to conditions.

The Etihad spokesperson said the company had been working consistently with key stakeholders in India over the past 15 months to help find a solution and ensure Jet’s return as a viable and competitive Indian airline. Etihad continues to do so, the spokesperson added.

Etihad re-emphasized that it cannot be expected to be the sole investor, and that, amongst other requirements, additional suitable investors would need to provide the majority of Jet Airways’ required recapitalisation, he added.

The letter of interest in many ways is a repeat of Etihad’s earlier stand. Among its key demands, one has been met already. It had earlier insisted that Jet promoter Naresh Goyal shouldn’t have any role in managing the airline. Subsequently, Goyal (and his nominees) resigned from the board and a substantial portion of his shareholding has been pledged to the lenders. Before Jet was grounded in April, sovereign wealth fund NIIF was in talks with lenders to pick up a 20 per cent stake in the airline, but the deal failed to fructify. It will take some effort to restart any deal talk now, another source aware of the developments pointed out. With the bankers-led resolution plan going nowhere, Etihad had decided to exit the venture and had asked the government to buy out its 24 per cent stake in the company for around Rs 150 a share, valuing its shares at Rs 400 crore. However, banks in a revised proposal decided to convert their debt to equity and have 50.1 per cent shareholding. That arrangement meant reducing the stakes held by Goyal and Etihad by half. Even that proposal failed.

Last Friday, SBI-led consortium of lenders said bids had come from Etihad Airways and a few unsolicited parties to acquire stake in Jet. The unsolicited bids came from UK-based entrepreneur Jason Unsworth and a London firm Adi Partners.