To step down as chairman and will have no executive role; his stake will come down to 17% from current 51%.
Jet Airways chairman Naresh Goyal has sought an urgent funding of Rs 750 crore from its equity partner Etihad, citing “the very precarious” position of the airline following the lingering cash flow issues which got amplified after the forced grounding of over 50 of its planes.
In a letter to the Abu Dhabi-based carrier’s group chief executive Tony Douglas, Goyal said the airline has also secured the go-ahead from the civil aviation ministry to pledge its shares in JetPrivelege for securing the interim funding. The airline holds a 49.9% stake in the loyalty programme, while the majority is with Etihad.
The Etihad board met in Abu Dhabi on Monday to discuss the resolution plan. However, the outcome of the meeting was not known till the time of going to the press .
“I now look forward to your support and cooperation in saving the airline by an urgent fund infusion of Rs 750 crore by early next week, so that a matching contribution from banks is also disbursed, as per the resolution plan,” Goyal said in the letter dated March 8.
On February 14, the airline’s board had approved a debt recast plan whereby the lenders would become the largest shareholders in the airline by converting the debt into equity at a nominal price of `1. The same was approved by the shareholders on February 21.
“Any conditions precedent to the Rs 750-crore infusion by Etihad Airways may please be taken up with the banks and settled bilaterally with them, so that the much-needed funding is made available to Jet Airways early next week,” he said.
He also warned that the if interim funding is not received at the earliest it will be severely “deleterious” to the future of the carrier and could even result in its “grounding”.
According to the bank-led resolution plan, Etihad needs to infuse an equity of between Rs 1,600 and Rs 1,900 crore resulting in its shareholding of 24.9%. The lenders will become the largest shareholder by infusing an equity of `1,000 crore leading to a shareholding of 29.5%.
An amount of Rs 450 crore currently in the form of liabilties owed to the Naresh Goyal promoter group’s entities of Jet Airways plus an infusion of Rs 250 crore that has already been received, totalling `750 crore shall be converted into equity shares giving the Naresh Goyal group an equity of 17.1% from the current 51%.
Further, as per the memorandum of understanding between Jet and Etihad, Naresh Goyal’s family shareholding in Jet Airways will be capped at 22%.
A new investor will infuse equity to the extent of Rs 1,600-1,900 crore resulting in a shareholding of 20%.
The shareholders of Jet Airways and the new investor shall subscribe to equity shares of the company in a manner set out above pursuant to a rights issue. However, the Naresh Goyal group and the lenders will forego and renounce their pro-rata entitlement of participation in the rights issuance.
The new board of Jet Airways will have 12 members. There will be two nominees of Naresh Goyal, other than Goyal himself and his wife Anita Goyal. Etihad will appoint two nominees and the new investor will also have the same number of representative on the board. The lenders will have one nominee. In addition, there will be 4 independent directors and 1 executive director who shall be part of the senior management of Jet being the CEO/CFO.
Naresh Goyal will step down as chairman and as a director and will be designated as chairman emeritus which will be an honorary position with no executive role in the business of the company.
Goyal’s son Nivaan Goyal will be considered for an executive position subject to evaluation and recommendation by a professional third party executive assessment agency.
The Naresh Goyal family group will enter into a non-compete agreement which will be valid till it holds at least 10% stake in the company.