Countdown for lenders of Jet Airways, which was recently recognised as a stressed borrower and will require banks to provide for part of their £820 million exposure to the airline in their Q4 results. State Bank of India (SBI) said that lenders of Jet are considering a restructuring plan, an acknowledgment that the loan is not viable in the present form. RBI norms require lenders to make at least 15 per cent provisions on their exposure once a loan is restructured.
The actual hit could be higher considering that both promoter Naresh Goyal and Etihad which holds 24 per cent in Jet are unwilling to bring in funds without relief in repayment. In a statement, SBI said that besides getting the lender's board clearance, any restructuring plan will need to be approved by RBI, Sebi and possibly the ministry of civil aviation. Making matters more difficult for the lenders were fresh conditions imposed by Goyal, who while asking for debt relief said that he was willing to invest £70 million provided his stake does not fall below 25 per cent. Meanwhile, Jet's minority stakeholders Etihad Airways' said that its investment would be subject to Goyal not holding more than 22 per cent stake.
In his letter to SBI, Goyal has warned of “significant cash crunch and imminent grounding,” which the airline is facing. He has also reportedly offered to pledge all his shares if his stake is kept at a minimum 25 per cent. “Should this not be possible, then I would not be able to infuse any funds or pledge my shares, unless Sebi accords me an exemption permitting me to increase my reduced stake (if it is to be below 25 per cent) without triggering the Takeover Code,” Goyal's letter said.
Goyal's communication to lenders comes a day after his partner Etihad set fresh conditions for picking up stake in the distressed airline. In a communication to SBI, Etihad Group CEO Tony Douglas sought a written assurance from Sebi exempting Etihad from pricing norms and a requirement to make an open letter. He has also called for Goyal reducing his stake. His letter said, “Without this approval we are not willing to invest a single penny further.” Lenders refuse to lobby regulators on behalf of Jet Airways or Etihad on pricing norms for preferential shares but they are still hopeful of a deal between the two partners despite strong posturing by both.
