Creditor banks hope to pilot Jet Airways with 50.1% stake

Jet Airways Ltd has agreed to give lenders a majority stake in the cash-strapped airline against overdue loans through conversion of loans into equity extended to it.

Accordingly, the board of directors of Jet Airways agreed to allot 114 million shares at an aggregate value of Re1 to the lenders’ consortium led by State Bank of India, as part of a provisional resolution plan.
The board, as part of a provisional resolution plan, agreed to allot 114 million shares at an aggregate value of Re1 to the lenders’ consortium led by State Bank of India, according to the airline’s stock exchange filing. 
The airline aims to increase authorised share capital to Rs2,200 crore. This would include Rs680 crore of equity capital and Rs1,520 crore of preference share capital. 
Through the conversion, the lenders will end up owning 50.1 per cent in the full-service carrier. “...under the RBI Circular, lenders can convert debt into equity at Re1 when book value per share of a company is negative,” the Jet statement said. 
The conversion will, leave Naresh Goyal, founder promoter of the beleaguered Jet Airways, with just 20 per cent or lesser stake, down from 51 per cent at present, while Etihad Airways (along with a local partner) could eventually own a majority share. 
The resolution plan allows the lending consortium to nominate members on the board. The company called an extraordinary general meeting on 21 February for shareholder approval for issue of additional shares.
Jet Airways estimates that it would need about Rs8,500 crore, including Rs1,700 crore for debt repayments, to stay on course. That will be met through equity infusion, debt restructuring, sale and leaseback, refinancing of aircraft, among other things, according to the plan prepared in consultation with lenders. 
The airline, which has a debt of over Rs10,900 crore, defaulted on repayments and struggled to pay salaries as higher fuel prices and low fares in a competitive market left it short of cash. The new plan seeks to avail additional interim credit from domestic lenders.
The lending consortium, oversight committee of the Indian Banks’ Association, board of directors of Etihad Airways and promoter Naresh Goyal will review the plan and give their final approval.