Cash-strapped private airline Jet Airways will raise about Rs 2,500 crore through a rights issue, media reports say. Lenders to the company that has defaulted on debt repayment will also look at a debt-to-equity conversion. While the Naresh Goyal-founded company's creditors may convert Rs 1,000 crore of debt into equity, they will also bring in more equity through a rights issue as part of a deal the airline had with the lenders. Goyal and foreign partner Etihad Airways, which has a 24 per cent stake in the airline, will infuse approximately Rs 2,000 crore into the airline, a report quoting an unidentified source said.
The government-owned National Investment and Infrastructure Fund (NIIF) is likely to buy up to 20 per cent stake amounting to Rs 1,500 crore, a report on the Business Standard website said. NIIF and banks will together come to own a 51 per cent stake in the company.
The lenders approached NIIF after Etihad Airways refused to increase its stake beyond 25 per cent in the absence of an exemption from the open offer requirement. Etihad failed to secure such an exemption from the Securities and Exchange Board of India (Sebi).
Etihad Airways plans to infuse Rs 1,450 crore more to maintain its stake at 24 per cent while Goyal would bring in Rs 550 crore to keep his stake at around 21 per cent, according to the report. Goyal has already infused Rs 250 crore into the airline.
"At the first stage of the resolution plan, lenders have agreed to convert around Rs 1,000 crore of debt into equity. In the second stage, there will be a rights issue of around Rs 2,500 crore in which banks will participate. This process is subject to approval from the promoter, lenders and Etihad Airways. It may take around two months to close," the report said quoting an official with a lender. There are also reports that the SBI-led consortium of banks would release around Rs 550 crore in 15 days to bridge the immediate funding gap.
While the draft resolution plan has got the Jet board's nod, it is awaiting approval from the banks and Abu Dhabi-based UAE national carrier Etihad Airways. The deal will also require the approval of various regulatory authorities, according to sources.
The draft resolution plan proposes to bridge the airline's immediate funding gap of Rs 8,500 crore. "There will be equity infusion, sale or sale and leaseback, debt-to-equity conversion, and refinancing of aircraft. A combination of all these will help to reduce the debt of the company. But, I will be unable to give you the numbers right now," Amit Agarwal, the chief financial officer at Jet Airways, told reporters.
Jet had a total debt of Rs 7,654 crore as of December-end, including aircraft loans worth Rs 1,700 crore. About 60 per cent of the loans are dollar-denominated and the foreign exchange fluctuations badly affect it. Jet has called an extraordinary general meeting next week to secure shareholders' nod for the issue of 110.4 million shares to lenders. Jet's travails are symptomatic of the Indian aviation industry, which has been hit by intensive domestic competition, fuel costs linked to international crude prices, rupee's depreciation against the dollar, and a shortage of skilled staff.