Jet Airways shares plunged more than 8 percent intraday on January 16 after a media report said shareholder Etihad Airways offered to invest in the company at a price which is nearly half of January 15 closing price.
Sources told CNBC-TV18 that Etihad Group CEO Tony Douglas has written a letter to SBI Chairman on restructuring of the Indian airline.
As a part of restructuring, Etihad, which holds 24 percent stake in the Naresh Goyal-led company, said it would invest in Jet only at a price of Rs 150 apiece, which is nearly half of Tuesday's closing price of Rs 294.40.
Also read: Big day for Jet Airways: Lenders to meet and discuss resolution plan
"Current situation of Jet Airways is precarious and needs emergency funding. Jet is unable to continue funding operations beyond this week," the report said, adding there is an imminent risk of lessors grounding aircraft.
In fact, the report further said Jet would require more equity funding than mentioned in the resolution plan. But Etihad would not pledge additional shares to raise debt, it added.
Jet Airways has now gone through three consecutive quarters, incurring over Rs 1,000 crore in losses in each. Earlier reports suggest the airline's lessors and MRO (maintenance, repair, overhaul) partners are losing patience over non-payment of dues. And its lenders are now wary of a Kingfisher-like situation after Jet Airways defaulted on loan repayments in December.
Jet Airways owes over Rs 8,000 crore to SBI-led consortium and its account is currently in SMA-0 category.
According to the report, Etihad Airways now wants operation control over its Indian partner, and that can only happen once Goyal lets go.
Hence, Etihad—a critical player in the whole deal—wants exemption from SEBI on preferential pricing and open offer guidelines. the report said the company is in touch with SEBI on exemption and wants written permission from the market regulator on the same.
Douglas also wants SBI to speak to aviation ministry on exemption, the report added.
Currently, as per rule, foreign airline company cannot have more than 49 percent stake in an Indian airline company.
Sources said in a letter to SEBI, Etihad CEO further said the debt to Naresh Goyal (who holds 51 percent stake in Jet) and related parties should not be converted to equity and bankers should insist on a moratorium on debt taken from Goyal
"Goyal's role should be well defined and no board seat for Goyal himself. Goyal and family should not be allowed to act on behalf of Jet Airways," the report said, adding Etihad wants 9-member board with only two representatives from Goyal & lenders.
According to the report, Goyal and related parties stake to be restricted to 22 percent. "Etihad will not control board or management, in-line with Indian rules"
Earlier this month, sources had also said that according to resolution plan, promoter Naresh Goyal is likely to step down from the board giving up majority control and his stake in the airline may be down to 20-25 percent with voting rights capped at 10 percent after the restructuring. "His son Nivaan Goyal may replace him on the board."
Etihad won't be able to persuade HSBC and Mashreq to lend more. Hence, Indian lenders have to bring in required funding, the report said.
Etihad had invested Rs 2,069 crore in Jet Airways in 2013 for a 24 percent stake. Jet's share price is trading 60 percent lower from the Rs 750-level last seen in 2013.
At 12:45 hours IST, the stock was quoting at Rs 274.90, down Rs 19.50, or 6.62 percent on the BSE.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
Find the best of Al News in one place, specially curated for you every weekend.
Stay on top of the latest tech trends and biggest startup news.
