The Etihad Airways board will meet on March 31 to take a final call on whether it will bail out ailing Jet Airways or exit it, sources told Mint.
Tony Douglas, CEO of Etihad, met State Bank of India (SBI) Chairman Rajnish Kumar on March 18 with an exit proposal. He asked lenders to buy Etihad's entire 24 percent stake in the cash-strapped airline at Rs 150 per share, or about Rs 400 crore, should the carrier decide to exit.
To infuse fresh capital into Jet Airways, Douglas has specific demands, which include removal of the Naresh Goyal group from the board altogether. The Middle Eastern airline also demanded a guarantee from the banks for offering more credit to the cash-strapped airline.
Read: Jet Airways founder Naresh Goyal to quit as Chairman today
"Etihad has also sought a 'put option' through which it can sell its entire stake to the lenders (led by SBI) if it is not happy with the revised resolution plan," the newspaper report quoted one of the sources as saying. A put option is an option contract giving the seller the right, but not the obligation, to sell a specified amount of an underlying security at a specified price within a specific time frame.
Moneycontrol couldn’t independently verify the report.
This comes after both Jet Airways and Etihad spent weeks deliberating a resolution plan for the former, whose plight is getting worse. Etihad was going to make a fresh investment but took a U-turn later. The airline believes that banks are being 'soft' on Goyal by giving him the option of retaining the clawback option in the airline.
It was reported on March 15 that Etihad was not prepared to meet the bailout terms for Jet Airways' proposed by its lenders because it did not agree with Goyal's demand for removal of the perpetuity clause that caps his shareholding at 22 percent.
Jet Airways defaulted on loan repayment in December. The time for lenders seems to be running out as the Reserve Bank of India (RBI) dictates that cases of default companies like Jet Airways must be resolved within 180 days of their first default.
The airline has failed to pay its employees, including pilots, and defaulted on many dues in the past months. This has resulted in the grounding of more than half of its fleet. Pilots have also threatened a strike from April 1.
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