A restructuring plan that Jet Airways proposes to present to an extraordinary general meeting (EGM) on February 21 will seek its assent to convert some of the airline's debt to equity.
The company will seek permission to raise its authorised share capital through the issue of preferential shares and induct lenders' nominees on the board, according to a media report.
The EGM will vote on the bailout plan that the airline's founder-chairman Naresh Goyal has been negotiating with stakeholders.
Some sources suggest the plan contains a proposal to dilute Goyal's stake to less than 20 percent from 51 percent deferring to the demand of some of the lenders.
An enhanced equity base will allow the company to issue fresh shares and convert loans into equity. The airline's present authorised share capital is Rs 200 crore, while its paid-up capital (excluding share premium) is Rs 113 crore, media reports say.
The proposal is to raise the authorised share capital to Rs 2,200 crore including Rs 680 crore of equity capital and Rs 1,520 crore of preference shares. The airline could be looking at different fundraising instruments including redeemable preference shares in lieu of external commercial borrowings, an industry expert suggests.
Jet is saddled with a debt of more than Rs 8,200 crore and a State Bank of India-led consortium of lenders began working on a resolution plan after the company defaulted on the principal and interest payments for the December-end quarter. The resolution plan is expected to be ready by early February.
Interim financing measure
Goyal's stake in the airline he founded could go down even to 16 percent, while Etihad Airways' shareholding could rise from 24 per cent to almost 40 percent. Lenders would control about 30 percent of the equity. The balance will be with the public.
Etihad has sought a waiver from an open offer and relaxation of preferential pricing norms, according to the Business Standard. A decision on the request is pending with market regulator Securities and Exchange Board of India (Sebi), the report says.
The Abu Dhabi-based United Arab Emirates (UAE) national carrier has also appointed Alvarez & Marsal to do due diligence on Jet. Etihad has indicated that it would complete the process by February 15 and has agreed to support the release of $35 million from Jet's loyalty programme in which Etihad has shown interest as an interim financing measure.