Naresh Goyal to shed stake to 17% in Jet bailout plan; lenders to hold 30%

Etihad board to take up resolution deal tomorrow

Jet Airways’ rescue plan, which will be taken up for approval by the board of Etihad Airways on Monday, will see a major rejig in the promoters’ shareholding. According to the finalised resolution plan, Jet Founder and Chairman Naresh Goyal’s stake will come down to 17 per cent from the current 51 per cent, sources in the know said. As sought by Jet’s joint venture partner Etihad, Goyal will step down from the board.

Etihad will own 24.9 per cent in Jet, marginally up from its 24 per cent stake now. The consortium of lenders, led by State Bank of India (SBI), will hold 30 per cent, while new investors — National Infrastructure Investment Fund — will pick up 20 per cent in the airline. Another 8 per cent shareholding will remain with public, it is learnt. It will possibly be a multi-part deal. 

The resolution plan has undergone several changes in the past few months due to the lack of a consensus among the stakeholders. Although the Abu Dhabi-headquartered airline had earlier raised concerns about the structuring of the deal, a source close to the development told Business Standard that the Etihad board is likely to approve the latest plan as ‘’they have got virtually everything they wanted’’. Etihad is keen to take control of an airline in a vibrant market, the source added.

Goyal and Etihad, who have had a public spat recently on the contours of the draft resolution plan, have already signed a memorandum of understanding (MoU) based on the recast deal, people close to the development pointed out.

When approached for comment, Etihad said on Saturday it continued to work constructively with Jet management, board and stakeholders. Jet Airways did not respond to the Business Standard query on the way forward. Continued investment in Jet is an attraction for Etihad as it gives the airline access to the fastest growing domestic market. The strategic ties between India and the UAE are also said to be a driver. But, the Etihad management has been grappling with its own challenges and restructuring its network and fleet order. “It is for Eithad board to decide whether it sees Jet as a viable investment which can give returns,” said an aviation source. 

Etihad had turned cold about investing fresh capital in Jet Airways as the stock market regulator Sebi did not approve the open offer waiver exemption it sought. At the same time, Etihad does not want to let go of its investment, another source said.

Etihad, which embarked on an equity investment strategy in 2011 expanding its global presence, put in $349 million in Jet in 2013. 

While then CEO James Hogan was upbeat on strategic investments for market expansion, the current management under chief executive Tony Douglas thinks differently. However, a greater say in operating Jet Airways and reduction of debt are among the factors which could drive Etihad's future investment, executives tracking the development pointed out.

If the plan is okayed by the Etihad board and subsequently by the lenders’ boards and regulatory authorities, Jet, with a debt pile of more than Rs 8,000 crore, would be saved from being dragged to the Insolvency and Bankruptcy Board of India (IBC). So close to the Lok Sabha election, the government does not want an airline going down. It is believed that the government has played a pro-active role in bailing out Jet Airways at a critical time as this. 

Already, Jet has grounded 40 per cent of its fleet and cancelled hundreds of flights across routes. Its lessors have threatened to take away planes if no resolution is reached by end of the month. Jet is running out of cash and options, insiders said. As per the bank-led resolution plan, Jet needs Rs 8,500 crore to meet the funding gap. The immediate funding requirement is pegged between Rs 500-1,000 crore as the airline needs to pay lessors and staff salaries.