SBI-led lenders to take control of Jet Airways

Board okays resolution plan that proposes debt conversion to equity at Re 1

Lenders to cash-strapped Jet Airways (India) are set to take control of the company under a proposed resolution plan that will see conversion of debt into equity at a token value of Re 1.

On Thursday, the company’s s board approved a resolution plan drawn by domestic lenders led by State Bank of India, as per the central bank’s February 12 circular on resolution of stressed loans, according to an exchange filing by Jet Airways.

The conversion of lenders’ debt into 11.4 crore shares will be carried out at an aggregate consideration of Re 1, as the Reserve Bank of India’s rules allow lenders to convert debt into equity at Re 1 in case the company’s book value per share is negative. Post the conversion, lenders will be the largest shareholder in the company.

The resolution plan is subject to the company receiving required approvals from shareholders at an extraordinary general meeting scheduled for February 21.

Currently, promoter Naresh Goyal and his family own 51 per cent stake in Jet Airways, while the singlelargest shareholder, Etihad Airways, holds 24 per cent.

The resolution plan estimates a funding gap of Rs 8,500 crore, which will be met through a mix of equity infusion, debt restructuring, and sale and lease of aircraft, among others. It also includes appointment of a nominee of the lenders on the board, sanction of interterm credit and likely changes to the executive management.

Jet Airways defaulted on repayment of working capital to lenders. Though it repaid part of the dues last month, there is substantial overdue. This, along with high fuel prices and fluctuating currency rates, is posing a serious challenge for the company to continue as a going concern, it said.

Jet Airways said the resolution plan would be presented for consideration before a consortium of lenders, the overseeing committee of the Indian Bankers’ Association, the board of directors of Etihad Airways, and the promoter.

Implementation of the final bank-led resolution plan will take place under the guidance of a monitoring agency and is subject to various approval. Earlier, Etihad Airways had reportedly offered to infuse funds into the airline at Rs 150 a share, but wanted a written exemption from the Securities and Exchange Board of India on preferential pricing and open offer guidelines.