Etihad flies in to rescue Jet, to help raise $150 mn loans

IMMEDIATE MEASURES Jet is already behind schedule on payment of its aircraft lease rentals and the worsening credit profile has made it impossible for the firm to raise fresh loans

MUMBAI: In an apparent rescue act, Etihad Airways of Abu Dhabi has offered to guarantee loans worth $150 million that Jet Airways (India) Ltd needs to keep the airline operational, two people directly aware of discussions between the two airlines said.

The development follows several rounds of talks between the two sides which also included a potential equity infusion by Etihad and adding a third Indian partner, said the two people cited above.

Both requested anonymity as the talks are private.

“As an immediate measure, Etihad has agreed to stand as a guarantor for any fresh loans to be raised by Jet Airways and has engaged at least two foreign banks, one of them headquartered in UK, to syndicate the new loans,” said the first person. “Both sides feel that an equity infusion by Etihad which already owns 24% in Jet Airways will take time and it may not be enough for Jet Airways to tide over its current financial troubles, given Jet’s depressed valuations,” the person said. “In the given situation, both sides which have been having discussions for a while now, feel that this is the best possible solution for now. According to industry estimates, Jet Airways will need close to $500 million between now and April next year to meet repayment obligations and manage operating expenses.”

A spokesperson for Etihad Airways said it does not com- Etihad offers guarantees for new loans of Jet Airways

The airline wants Indian banks to increase Jet’s borrowing limits

Indian banks yet to give firm commitment to Etihad on increasing limits Jet and Etihad still in talks for an equity infusion

Etihad in talks to rope in third partner to invest in Jet Airways ment on rumour or speculation. An email sent to Jet Airways remained unanswered until press time on Thursday.

Jet Airways is already behind schedule on payment of its aircraft lease rentals and has not paid staff salaries in full for the past few months. Since January, shares of Jet Airways have plunged more than 66% to ₹278.20.

In October, rating agency Icra downgraded Jet Airways’ credit rating to ‘B’, which is assigned to loan facilities with a high risk of default.

The worsening credit profile has made it virtually impossible for the company to raise fresh loans.

“Etihad’s offer comes with a rider,” said the second person cited above. “It also wants Jet’s domestic lenders to simultaneously increase limits for Jet’s loans. Some of Jet Airways’ biggest lenders, mainly public sector banks, have been sounded off by Etihad and Jet,” the person said adding that “the domestic lenders are yet to come back with a firm commitment”.

Mint reported in August that Jet Airways has written to a consortium of overseas lenders, seeking a waiver of a loan covenant on its existing debt facility of about $185 million in a bid to avoid a default on its loans.

Mint also reported on 5 December that Jet Airways has told its pilots at a meeting last week that it will bring on board a new investor in two-three months.

Jet Airways officials, led by chief executive Vinay Dube, gave the assurance at a 26 November meeting with the pilots’ union, National Aviator’s Guild.

The meeting was held to assuage pilots’ concerns about various issues including salary delays, Mint reported. MUMBAI: Weak global markets coupled with concerns over oil prices and assembly elections rattled Indian markets on Thursday, sending local shares sharply lower.

The Sensex and Nifty indices dropped around 1.6%, amid concerns over slowing global growth and doubts that the Us-china trade war will abate anytime soon. The 30-share Sensex closed at 35,312.13 points, down 572.28 points, or 1.59%, while the Nifty ended at 10,601.15, falling 181.75 points, or 1.69%.

Crude price slipped 2.26% on Thursday even as US President Donald trump urged the Organisation of Petroleum Exporting Countries (Opec) not to curb oil supplies before the start of a key meting. Oil veered between gains and losses as uncertainty lingers over the scale of output cuts. So far this year, crude prices have fallen 10.9% and are currently down 32% from their 2018 peak of $86.29 per barrel on 3 October.

Jayant Manglik, president, Religare Broking Ltd, said the markets were pressured by weak global markets and anxiety ahead of key events.

“Sentiment was downbeat from the beginning, citing weak global markets ahead of the Opec meet. Besides, rising anxiety among the participants ahead of assembly elections results and the deterioration of rupee further dampened the mood. Markets have been behaving extremely volatile for last one month and still there’s no sign of slowing down,” he added.

Among Asian indices, Hong Kong’s Hang Seng index fell 2.47%, China’s Shanghai Composite fell 1.68% and South Korea’s Kospi index fell 1.55%.

Investors also remained jittery ahead of state election results due next week. “Proximity to general elections increases the market relevance of the state elections. Results will be taken as a reflection of the underlying mood, especially on reform-led disruption and regional hot-button issues like rural policies and concern over farm distress,” said Radhika Rao, economist at DBS Bank, in a 26 November note. Global markets fell after the arrest of chief financial officer (CFO) of Chinese technology giant Huawei Technologies Co. reignited concerns about Us-china tensions.

Shares of non-banking financial companies (NBFCS) slumped after the Reserve Bank of India (RBI) dashed hopes of any special liquidity window for them—a key government demand to keep adequate liquidity in the system—but signalled more bond purchases via open market operations (OMOS) till end of March.

EQUITY INFUSION BY ETIHAD WILL TAKE TIME AND IT MAY NOT BE ENOUGH FOR JET TO TIDE OVER ITS CURRENT FINANCIAL TROUBLES