Jet lenders fail to rope in foreign investors; govt works to save airline

Lenders plan to get investors who could buy out their stake and take control of the ailing airline

Jet Airways lenders, who have held  talks with Abu Dhabi-based Etihad Airways as well as an American carrier on buying out the banks’ stake, have failed to make a headway so far, sources in the know have said. Delta Airlines is among the investors believed to have been approached by the Jet lenders on its interest in the proposed bidding, but this could not be confirmed independently. “While lenders are talking to Etihad and a US airline, the negotiations have not been smooth. The response has been cold,” a top government representative told Business Standard on Thursday.

The lenders led by State Bank of India are holding parleys with potential investors before a formal bid process kicks off. The move is meant to prevent a repeat of the Air India fiasco last year when not even a single investor participated in the bid. The government is learnt to be working overtime to rescue Jet and thousands of jobs at the airline ahead of the Lok Sabha elections.

While lenders are in the process of executing a resolution plan for Jet, which has a debt pile of around Rs 8,500 crore, by infusing emergency funds, they are simultaneously trying to ensure long-term investors for the airline. According to the resolution plan, Jet Founder Naresh Goyal’s stake has been halved to 25.5 per cent from 51 per cent and joint venture partner Etihad’s to 12 per cent from 24 per cent.

After Goyal and his wife have stepped down from the board of the company, the focus has been on the lenders who have converted their debt to equity to get a 50.1 per cent share in the airline.  Now, the lenders plan to get strategic investors who could buy out their stake and take control of the ailing airline.

As part of a draft plan, lenders have  assumed there could be two investors who would bid for Jet as a consortium. The two investor option is being discussed because under the foreign direct investment (FDI) policy, an airline can only pick up 49 per cent. A non-airline investor, which includes private equity funds, can invest up to 100 per cent. As the new investor is unlikely to get an exemption of the mandatory open offer, it may like to go with a consortium.

Getting back Etihad on to the deal table could be a hard bargain as it has already told the lenders that it’s ready to sell its stake at Rs 150 and exit the venture. Earlier, Etihad’s key condition for participating in the resolution plan was that Goyal should step down. While that has been taken care of, the Abu Dhabi airline is not willing to give any additional emergency fund to Jet.

Analysts point out that US carriers like Delta already have a close relationship with Jet. It had signed a comprehensive tripartite agreement some time ago with Delta and Air France- KLM, enabling it to use Amsterdam as an alternative hub to Abu Dhabi to fly its Indian passengers to the US.