Etihad Airways may not agree to a provisional debt resolution plan proposed by lenders for the cash-strapped Jet Airways, according to a Mint report.
At the board meeting of Etihad on March 12, several members expressed reservations about the terms proposed by Jet Airways' lenders, which included adding two nominee directors from the latter's promoter group, sources told the newspaper. The meeting remained inconclusive.
"Another contentious issue was Goyal's demand for exclusion of the perpetuity clause, which capped Goyal's shareholding to 22 percent," the report quoted a source as saying.
As per the provisional pact, a 'new investor' was to inject between Rs 1,600 crore to Rs 1,900 crore for about 20 percent in Jet Airways and the Goyal-led promoter group's stake was to fall to 17.1 percent, with a caveat seeking to cap it at 22 percent.
Watch: Editor's Take | Not Naresh Goyal, but Etihad now holding up Jet’s lifeline deal
At present, Etihad holds 24 percent stake in Jet Airways, while promoter Goyal and his family own a controlling 51 percent stake.
According to the report, Etihad's board is expected to meet again to discuss the revised terms. "Etihad may still consider a rescue plan and the board is expected to meet again to discuss the revised terms," another source told the newspaper.
Moneycontrol couldn’t independently verify the report.
An early resolution to the financial woes is crucial for crisis-hit Jet Airways as 61 of its 116 aircraft are currently grounded by lessors due to non-payment of lease rentals. It has also delayed salaries to pilots and interest payments on its debt.
Read: Naresh Goyal may step down, but is far from deboarding Jet Airways
On March 11, Jet Airways Chairman Naresh Goyal 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 that got amplified after the forced grounding of over 50 of its planes.
In a letter to the Gulf-based carrier's Group Chief Executive Tony Douglas, Goyal said the airline has also secured the go-ahead from the Aviation Ministry to pledge its shares in JetPrivilege for securing the interim funding.
Read: Profile | 'The great survivor' Naresh Goyal throws in the towel
Meanwhile, the distressed airline on March 11 defaulted on repayments on external commercial borrowings (ECBs) due to a paucity of funds.
On March 14, Jet Airways said it would be unable to repay HSBC Bank UAE ECBs worth $140 million, as per the report. The cash-strapped airline was expected to make the repayment through two tranches on March 11 ($31 million) and March 28 ($109 million), respectively.
The Reserve Bank of India (RBI) regulations state lenders must find a resolution to cases pertaining to defaulting companies within 180 days of their first default. If the case remains unresolved, the company has to be referred to a bankruptcy court.
Jet Airways, which has a gross debt of Rs 8,411 crore as of September-end, had first defaulted on a scheduled interest payment to domestic lenders on December 31, 2018.
Etihad Airways on March 14 reported its third consecutive annual loss despite cost savings
of nearly half a billion dollars as it trimmed its workforce and fleet. The Abu Dhabi state-owned airline blamed challenging market conditions including higher fuel prices for a $1.28 billion loss in 2018, less than the $1.58 billion it lost in 2017.