Jet Airways on Monday got a new lease of life after promoter Naresh Goyal and his spouse Anita Goyal stepped down, ceding control so that a new resolution plan may help revive the airline.
Banks have proposed a fresh resolution plan for Jet, in which they have taken control by acquiring 50.1% stake for ₹1, and have started the process to sell the airline to a new investor.
The move comes after the bank-led resolution plan approved by the board in February fell through as one of the investors, Etihad, decided not to subscribe to the proposed rights issue.
“Banks are basically putting up the company for sale,” said a person involved in the new plan.
With banks acquiring 50.1% stake, Mr. Goyal, whose stake will come down to 25.5%, has agreed to pledge 16% of his residual stake so that his effective stake declines to below 10%. According to highly-placed sources, lenders will invite Expression of Interest (EoI), for on-boarding of a new investor, on April 9, 2019, from interested parties.
“It will be an NCLT-like resolution outside the realm of NCLT,” a top official said. Binding bids will be invited by April 30 and the stake sale process will be completed by end-May.
Banks will extend ₹1,500 crore to the airline as priority funding, by way of debt. The current debt of the airline stands at ₹6,000 crore.
New management panel
The CEO, CFO and COO of Jet Airways will continue at the airline and a newly-constituted management committee will monitor day-to-day operations and ensure funds allocated are properly used.
The airline will run under the overall supervision of the Board of Directors, with McKinsey & Co and Alvarez Marshall as advisers to the management committee.
Tata Group is believed to emerge as the white knight to buy out Jet Airways from the lenders. A Tata spokesperson, however, declined to comment on market speculation.
The role to be played by Etihad remains uncertain. An email to clarify its stance remained unanswered till the time of going to press.
The roll-out of a resolution plan was delayed due to the unyielding stance adopted by Mr. Goyal and Etihad Airways, which had 24% stake in the airline.
Kapil Kaul, CEO, South Asia, CAPA, said, “The main promoter exiting the airline was on expected lines. The new board and the chairman must demonstrate confidence across all stakeholders.”
“I see lenders’ decision as high-risk and a not-so-high reward situation. It is critical that after infusing [an additional] ₹1,500 crore, Jet should head to NCLT if the lenders fail to get an investor on board,” Mr. Kaul added.
Monday’s development heralds the beginning of Jet’s first phase of revival. The immediate infusion of ₹1,500 crore through fresh borrowing would address the short-term worries of staff salary and leased planes which were grounded.
The resignation of Etihad’s nominee indicates that the Abu Dhabi-based airline may not stay invested in the company. A final decision will be taken on March 31 by Etihad’s board.
Jitender Bhargava, former executive director, Air India, said, “The resignation of Mr. Goyal is a welcome development in the interest of Jet Airways and Indian aviation. However, banks do not have competency in running airlines. They must find a buyer in the shortest possible time to avoid further loss.”
“We see this as positive for the company as urgency of funds and new investors wanting removal of old promoters are addressed. This should, to some extent, lead to revival of operations. There would be potential investors showing interest in the company as the routes and slots are having highest priority among corporate travellers,” said Sameer Kalra, equity research analyst and founder, Target Investing . Jet Airways said in a statement that it would engage with payment intermediaries for release of ‘trapped’ cash. The airline will leverage the funding to partly clear pending dues towards lessors, vendors, creditors and employees, in a phased manner.
“The move will see Jet Airways re-deploy several of its grounded aircraft back into its network, helping renew many of the routes it had temporarily suspended, which will help restore normalcy of operations, aiding the airline’s long-term transformation to continue expansion and to regain its position as a global player,” the airline said in a statement.
Mr. Goyal, in a statement said , “For the sake of my family of 22,000 employees and their respective families, I have today taken the step of stepping down from the Board of Jet Airways.”
(With inputs from Manojit Saha)
