Jet Airways lenders to create independent trust for stake of Goyal, Etihad

Lenders to cash-strapped Jet Airways are looking at creating an independent trust to transfer the shareholding of the erstwhile promoter Naresh Goyal and Etihad Airways to ensure a smooth stake sale.

The thrust is on transferring equity, trust structure and the call option (the right but not the obligation to buy), and paying the proceeds upfront. This is to give comfort to a new investor who wants to run the company without the former shareholders and promoters.

The plan takes into consideration that there will be two investors as partners. This is seen to be necessary to address the 49 per cent cap on direct investment.

There have been talks with international financial investors like private equity players for taking stake in Jet. The investment rules do not prescribe a ceiling for financial investors. The financial investor and airline could work jointly to pick up a stake in an auction.

A senior public sector banker looking at corporate banking said these points were part of plans under discussion and the details were yet to be finalised.

State Bank of India (SBI) will invite expressions of interest in April from potential entities willing to invest in the airline.

Finality about the new investor or investors is expected by the end of May.

The draft plan envisages transferring Goyal’s 25.1 per cent and Etihad 12 per cent (post-conversion) to an independent trust managed by lender-appointed trustees.
 

The lenders will have a call option on the shares owned by the trust at Rs 150 per share and some financial benefit in the form of carry (a kind of interest payment). The trust may pass on the proceeds received from selling shares/exercise of the call option to Goyal and Etihad. 

The resolution plan is being formulated by a consortium of domestic lenders led by SBI. It is in accordance with the guidelines set out in the Reserve Bank of India’s ‘Revised Framework for Resolution of Stressed Assets’.

Under the resolution plan, the lenders will convert the debt of Rs 1 into 114 million equity shares of Jet. This will expand the equity capital to 228 million shares in which lenders would have a 50.1 per cent stake. In the expanded capital, Goyal’s stake will come down from about 51 per cent to 25.1 per cent and that of Etihad from about 24 per cent to 12 per cent.

To a query on the proposed trust arrangement, an Etihad spokesperson said: “As always, Etihad continues to work closely with lenders, the Jet management and key stakeholders to facilitate a solution for Jet.” The airline did not elaborate on discussions with lenders.

The consortium of lenders is considering roping in former SBI chairman A K Purwar as chairman of the interim management committee. Also, the lenders are in the process of appointing SBI Capital as advisor in efforts to find a new investor. 

There are plans for infusing fresh equity capital through a rights issue at Rs 150 per share. The new partners are expected to participate in the rights offering. The estimated infusion of new capital is just over Rs 5,000 crore.

The five-point agenda
 

• Etihad to transfer 12% stake to trust
• Naresh Goyal to also move 25.1% stake to trust
• Trust managed by lender-appointed trustees
• Lenders to have call option on Etihad, Goyal’s stake
• Room for two new investors to come on board

Jet Airways pilots defer agitation

Jet Airways pilots have deferred their agitation to April 15. They had earlier taken a decision to stop flying from Monday. “State Bank of India has agreed to provide interim funding of Rs 1,500 crore. The bank will be inviting an expression of interest to find a new investor on April 9. The bank has shown positive intent and we felt we should give lenders and the management more time,” said Karan Chopra, president, National Aviators Guild.

BS Reporter

With inputs from Aneesh Phadnis in Mumbai