Jet Airways revival: Naresh Goyal steps down, lenders take charge

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Published: March 26, 2019 6:02:28 AM

The finalisation of the roadmap for the troubled airline comes at a time when 84 planes out of its total fleet size of 119 are grounded as it has been in a severe financial crunch and has not been able to service loan payment obligations to lessors, creditors and pilots in months.

Apart from the Goyals, one nominee of Etihad Airways PJSC, Kevin Knight, will also step down from the board. (File photo/IE)

After several weeks of speculations and uncertainties about the future course of Jet Airways, a blueprint for revival emerged on Monday, according to which the airline’s founder-chairman Naresh Goyal and his wife Anita Goyal will step down from the board. The cash-strapped airline will also receive an immediate funding of Rs 1,500 crore under a bank-led resolution plan.

Apart from the Goyals, one nominee of Etihad Airways PJSC, Kevin Knight, will also step down from the board. In effect, two nominees of the promoter will continue on the board and one nominee of Etihad. Two nominee directors representing lenders will be inducted into the board, Jet Airways told in a filing to the stock exchanges after its board meeting.

The board also approved the issue of 11.4 crore equity shares to the lenders upon conversion of Rs 1 of the outstanding debt. The lenders will infuse up to Rs 1,500 crore via debt instruments.

The board also approved the constitution of an interim management committee to manage and monitor the daily operations and cash flow of the company, the fling said.

Though the company did not share any other details, speaking to business news channels, State Bank of India chairman, Rajnish Kumar said that the lenders will be getting a stake of 51%, Goyal’s stake will come down from 51% to around 25%, while that of Etihad Airways will come down to 12% from the current 24%.

“The Rs 1,500 crore is a fully secured, priority, interim funding for two months which we believe is good enough to normalise operations of the airline before it is sold as a going concern,” Kumar told CNBC-TV18. “In return, lenders are getting a 51% stake, which itself is worth over Rs 1,500 crore,” he added.

Kumar said that expression of interest for bids will be floated by April 9 and the deadline for binding bids is April 30, and a new investor is expected to be on board by May 31. “There is no legal bar on anyone with a funding and revival plan in place. The option is open for anyone including Naresh Goyal and Etihad to bid for the stake,” Kumar said.

In a separate statement later in the evening, Jet Airways said that 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,” it said.

The statement quoted Goyal as stating, “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. I became the Chairman on 1st April, 1992 and my family is behind me and with me in this decision and I hope you will support my decision too. I will miss you one and all. Thank you for your brilliant dedication and loyalty down the years. I am proud of you and wish you all a great future ahead with our Jet Airways!”

The finalisation of the roadmap for the troubled airline comes at a time when 84 planes out of its total fleet size of 119 are grounded as it has been in a severe financial crunch and has not been able to service loan payment obligations to lessors, creditors and pilots in months.

The carrier’s pilots have threatened to cease work starting April 1 unless their salaries are paid and resolution plan finalised by the month-end.

As per the post-earnings conference call for its Q3 results, as of December 2018, the airline’s gross debt stood at Rs 7,654 crore and net debt at Rs 7,299 crore.

An earlier arrangement for interim financing included Rs 750 crore infusion by the lenders against an equivalent infusion by Etihad, which it was to provide itself or procure from an offshore or onshore lender, and was subject to approvals from Etihad Airways board of directors, which never materialised.

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