This is the second instalment of a $140-million loan that Jet Airways had taken in 2014, for which Etihad Airways was guarantor
The financial troubles of Jet Airways seem to be growing as the cash-strapped carrier could be staring at another default of $109 million, which has to be paid to the HSBC Bank Middle East by March 28. This is the second instalment of a $140-million loan Jet had taken in 2014, for which Etihad Airways was the guarantor.
On March 11, Jet Airways defaulted on its commercial borrowings of $31 million to HSBC, which were guaranteed by Etihad, Business Standard reported.
The cash-strapped airline wrote to HSBC on March 11 about the liquidity crunch it is experiencing and assured the bank that the lenders are working on a resolution plan. The carrier informed the bank that the plan is in its final stage and awaiting corporate and regulatory approvals.
The memorandum of understanding (MoU) between Jet Airways' Naresh Goyal and Etihad protected the interests of the latter as the guarantor. Sources told the paper that the MoU has a clause, which states that before getting credit, Jet Airways had to pledge 15 percent of its shares in JetPrivilege in favour of HSBC as security.
Jet Airways has a 49.9 percent stake in its loyalty programme -- JetPrivilege, which has an estimated enterprise value of around Rs 4,000 crore. The airline needs fresh credit as soon as possible, as over 40 percent of its fleet is grounded. The resolution plan led by the banks planned to bring in nearly Rs 4,000 crore.
Etihad was expected to infuse Rs 750 crore into the airline, after which the banks were to contribute the same amount. But that plan has been delayed by the Abu Dhabi-based carrier.
Jet Airways signed the loan agreement with HSBC in January 2014 and it was reworked with an amendment in two months after that. The loan was taken by the company in two instalments, on March 5 and March 27, 2014, for five years, with bullet repayment obligations at the end of the fifth year.
Goyal communicated with Etihad group CEO Tony Douglas recently, making it clear that Etihad's fund infusion was imperative for Jet Airways, but no confirmation regarding the deal has come from Etihad as of now.
This comes weeks after Goyal and Etihad agreed upon a new deal with changes to equity contributions from both sides after long deliberation.Lenders to Jet Airways, led by State Bank of India, had designed a resolution plan, according to which Etihad is expected to infuse Rs 1,600-1,900 crore in the airline. The banks were to provide Rs 1,000 crore and the proposed new investor -- National Investment and Infrastructure Fund -- was to bring in Rs 1,600-1,900 crore. Goyal's stake would then come down from 51 percent to 17.1 percent.