In another attempt to keep its operations up and running, debt-laden Jet Airways is looking to borrow $150 million from an external bank. The private carrier has requested its partner Etihad Airways to become the guarantor for the loans.
According to Economic Times, the beleaguered airline has made this proposal at a time when an attempt to bring in more equity investments is stuck with Etihad over the issue of majority shareholding. But the Abu Dhabi-based airline, which has a 24 per cent share in Jet Airways has not yet agreed to the proposal made by Jet.
Etihad has argued that it would very risky to invest in Jet Airways as India's second largest airline by market share is undergoing a forensic investigation directed by its top local lender, State Bank of India (SBI). One of the sources aware of the development said that "The risks would be extremely high in backing such loans."
It has now been a while since Etihad has been approached by Jet Airways chairman Naresh Goyal to put in fresh equity. However, Etihad has made some conditions that are not acceptable to Jet Airways.
Etihad has shown its willingness to make an equity investment, but with a condition of buying 49 per cent stakes in Jet that is the maximum a foreign carrier is allowed to own in an Indian peer. The proposed sharing holding pattern would mean the current promoters led by Goyal may have to dilute his controlling stake in Jet.
Since the option of equity infusion is witnessing a deadlock, debt raising is the only immediate option for Jet which is reeling under heavy debt and huge losses. The cash levels in the private player are so low that it is struggling to even salaries or plane lease rentals regularly. The airline is staring at a debt of around Rs 8,000 crore on its balance sheet.
Moreover, the airline is also facing a forensic audit by consultant Ernst & Young (EY) by the direction of state-owned, State Bank of India (SBI). It is to be noted that Such an audit is typically being carried out when there is suspicion of fund diversion.
