Lenders of the cash-strapped
Jet Airways have chalked out an alternative resolution plan for the survival of the airline in case the lenders could not find a single investor willing to buy a majority stake in the troubled carrier. There will be no shareholding of Naresh Goyal or Etihad as per the outcome of this plan as this will require them to exit the airline completely and transfer their respective stake of 25.5 percent and 12 percent to an independent trust, managed by lenders-appointed trustees.
The lenders will have a call option on the shares owned by the trust at Rs 150 per share and a carried interest of 8 percent per annum. As per the draft plan, the trust may pass on the proceeds received from sale of shares or exercise of call option to
Etihad and Naresh Goyal.
For a full resolution of Jet Airways financial crisis, the airline would need a total of Rs 10,645 crore, out of which Rs 4,094 crore are overdue to creditors and Rs 1,170 crore is for settlement of unsecured dues.
The plan lists out five sources to raise Rs 10,645 crore, 50 percent of which or Rs 5,135 crore will be done by new cash equity infusion, Rs 2,400 crore worth of new loan will help in refinancing of aircraft and more secured facilities for 10 Boeing 777 planes, Rs 2000 crore from non-fund based facilities, cash receivables by the International Air Transport Association of Rs 725 crore and another Rs 385 crore from sale and leaseback of three Airbus A330s.
A copy of the resolution plan showed that the alternative solution requires all shareholders to transfer a part or entire stake to an independent trust. Post that, lenders are hoping to raise around Rs 5,135 crore through a rights issue at a price of Rs 150 per share, and subsequently, they plan to raise Rs 2100 crore and Rs 1,700 crore via equity offerings to two separate investors.
The consortium of banks led by State Bank of India is expected to help in equity infusion of Rs 850 crore, and an additional Rs 485 crore will be raised on behalf of public shareholders via banks underwriting a rights issue.
In addition to this, banks will also give an additional loan of Rs 2,400 crore to Jet Airways and around Rs 2,000 crore in non-fund based facilities.
Following the new funding, according to the draft plan, the lenders will be directed to write-down their entire debt of around Rs 2,600 crore (as on March 21) and at the same time, foreign lenders are required to take a hair cut of Rs 1,170 crore. The plan does not ask for any write-down by lessors and other creditors.
While the banks estimate gains of Rs 5,290 crore in a matter of three years of the implementation of the resolution plan, they will have to incur losses worth Rs 2,654 crore on account of write-offs.
Overall, lenders are hoping to achieve gains of Rs 2,636 crore by March 2022 assuming the share price of the company reaches the levels of Rs 303 per share. As on date, lenders are staring at a loss of Rs 944 crore.
Post the rights issue, the shareholding pattern of the airline is expected to change substantially. The stake of lenders will come down to 29.9 percent from current 50.1 percent, public shareholding will be reduced to 10.7% from 12.5 percent, the two new investors will hold 19.9 percent and 24.6 percent, and lastly, the trust will have a stake of 14.9 percent.
Now that a back-up plan is in place, it remains to be seen whether the The consortium of lenders is expected to invite expressions of interest for stake sale in Jet Airways on April 9 but one key point for the airline whether it goes ahead with Plan A or B will be its ability to retain key landing and take-off slots at major airports.
first plan takes off.