Jet may raise ₹4,000 cr via rights issue
MUMBAI: Jet Airways (India) Ltd may consider raising ₹4,000 crore through a rights issue if the Securities and Exchange Board of India (Sebi) denies an exemption to Abu Dhabi-based Etihad Airways PJSC from making an open offer in lieu of raising its stake in the cash-strapped carrier, said two people with direct knowledge of the matter requesting anonymity.
Jet Airways’ promoter and founder Naresh Goyal, lenders and Etihad Airways will subscribe to the rights issue as part of the resolution plan, said one of the persons cited above.
The banks-led provisional debt resolution plan, approved by the Jet Airways board, proposes restructuring under provisions of the RBI to meet a funding gap of nearly ₹8,500 crore. The gap is to be met through a mix of equity infusion, debt restructuring, sale, SLB, and refinancing of aircraft, among others.
In an extraordinary general meeting (EGM) on February 21, shareholders of Jet Airways will vote on a proposal to raise its authorized share capital from ₹200 crore to ₹2,200 crore through a special resolution.
The proposal from Jet Airways also contains a plan to give lenders the right to nominate one or more members on the airline’s board, post conversion of debt into equity.
Etihad could look at subscribing either jointly or individually, the second person said.
Jet Airways did not respond to emailed queries.
The Mumbai-based airline had last week approved a bailout plan that would allow its domestic lenders, led by State Bank of India (SBI), to convert their loans into equity, making them the largest shareholders of the cashstrapped airline.
The decision to raise funds through rights issues comes after the domestic lenders decided to convert existing debt into 114 million shares at a consideration of ₹1 according to Reserve Bank of India (RBI) norms.
Following the debt conversion, lenders will pick up more than 50% stake and the equity holding of Goyal and Etihad will halve to 25% and 12%, respectively. Goyal and Etihad currently own stakes of 51% and 24% each in Jet Airways, respectively .
The airline had said it is working on a comprehensive resolution plan towards a turnaround for sustained growth and restoration of financial health.
It added that the resolution plan “contemplates various options on the debt-equity mix, proportion of equity infusion by the various stakeholders, and the consequent change in the composition of the company’s board of directors”.
The lenders are also looking at converting the existing debt of ₹1,000 crore into equity type of products through cumulative redeemable preference shares, which will be repaid over a period of 15 years, said one of the persons mentioned above.
“Lenders will infuse this additional funds on a pro rata basis. The company on the other hand will raise additional ₹2,000 crore through sale and lease buyback of aircraft,” the person said.