TPG Capital, Etihad, NIIF likely to bid for cash-strapped Jet Airways

Lenders' consortium, led by State Bank of India, has gone all out to work out a resolution plan for Jet despite several legal hurdles

Abu-Dhabi based Etihad Airways, a 24 per cent shareholder in Jet Airways, is evaluating its options to participate in a pre-bid process for the troubled airline as part of a bank-led resolution plan, sources in the know said.

Etihad, which had recently indicated to Jet lenders that it wanted to sell its stake in the airline founded by Naresh Goyal more than 25 years ago, is yet to confirm if it’s interested, keeping the stakeholders guessing.

The stake sale process of Jet kicked off on Monday, two days after its scheduled opening. Potential bidders have time only till Wednesday evening to submit their expressions of interest (EoIs).   

Besides Etihad, there are other potential bidders, too. San Francisco-based private equity investment firm TPG Capital, with an estimated $75 billion, is in the race to bid for Jet Airways, which is left with a fifth of its original fleet and has an accumulated debt of over Rs 8,500 crore. Atlanta-based airline Delta is in the reckoning as well. 

A consortium arrangement between Delta and TPG has not been ruled out. TPG declined to comment on its interest, and a spokesperson of Delta said the company did not comment on speculation. 

National Investment and Infrastructure Fund (NIIF), India’s first sovereign wealth fund, is yet another entity which could possibly invest in Jet to rescue the airline. NIIF can skip the EoI stage and straight bid for Jet later.    

Ahead of the Lok Sabha elections starting on April 11, the government doesn’t want Jet, with more than 20,000 employees, to go down. In that backdrop, lenders’ consortium, led by State Bank of India (SBI), has gone all out to work out a resolution plan for the private airline despite several legal hurdles. 

Originally, lenders were to receive 114 million shares in the airline and offer them for sale but now the plan has been stalled after a Supreme Court judgment last week.

According to the EoI document issued on Monday, an acquirer (of Jet Airways) will have to take at least 35.4 million shares equalling 31.2 per cent stake in the airline. These represent shares pledged by the airline's promoter and former chairman Naresh Goyal, banking sources said. The acquirer can take a maximum of 85.1 million shares equal to 75 per cent control.

Etihad, if it decides to submit its interest, could do so as  part of a consortium, it is learnt. It had earlier demanded removal of Goyal and exemption from an open offer as its conditions for investment. It did not secure an exemption subsequently. Etihad is learnt to have been in discussion with the SBI and other lenders for releasing its pledge on over 20 Jet aircraft as part of the resolution process. The idea was that Etihad could help in undertaking a sale and lease back of these aircraft to Jet and also infuse cash for running the airline, sources said. But, SBI was reluctant as there’s no precedence for such a deal in India, it is learnt. Etihad said it would not comment on rumour and speculation.

NIIF had been approached earlier to infuse money in the airline under the bank-led revival plan. TPG had earlier expressed interest in acquiring Jet's loyalty programme. It declined comment.

"New investors would be interested in majority control of the airline. With one third of stake, how can one restructure the airline," an industry observer asked.

Under the EoI conditions, both financial and strategic investors can bid for the airline - either individually or as a consortium. The potential bidders have to fulfill a criteria regarding net worth, capital available for deployment, experience in aviation sector and so on. For example, a strategic investor would need to have a minimum networth of Rs 1,000 crore in the previous financial year or funds for investment or assets in India worth Rs 1,000 crore or minimum three years experience in commercial aviation business. 

A consortium can have up to three members. A consortium member would need at least 15 per cent stake and lead partner would require at least 26 per cent stake in the consortium. Bidders will have to submit a preliminary term sheet as  part of the EoI process providing valuation for 100 per cent equity capital of the company and settlement of all obligations of the airline in relation to existing loans. 

As per the guidelines, government entities and sovereign wealth funds will be able to place a bid straightaway and are exempt from the expression of interest stage.