Chennai: Cash trapped air carrier Jet Airways (India) Ltd may consider raising Rs 4,000 crore through a rights issue if the Securities and Exchange Board of India (Sebi) denies an exemption to Abu Dhabi-based Etihad Airways PJSC from making an open offer in lieu of raising its stake in the cash-strapped carrier, reports state.
Jet Airways promoter and founder Naresh Goyal, the airline’s lenders and Etihad will subscribe to the rights issue as part of the resolution plan, said reports. Etihad could look at subscribing either jointly or individually, they added.
The Mumbai-based airline had last week approved a bailout plan that would allow its domestic lenders, led by State Bank of India (SBI), to convert their loans into equity, making them the largest shareholders of the cash-strapped airline.
The proposal from Jet Airways also contains a plan to give lenders the right to nominate one or more members on the airline’s board, post conversion of debt into equity.
The decision to raise funds through rights issues comes after the domestic lenders decided to convert existing debt into 114 million shares at a consideration of Rs 1 according to Reserve Bank of India (RBI) norms.
Following the debt conversion, lenders will pick up more than 50 per cent stake and the equity holding of Goyal and Etihad will halve to 25 per cent and 12 per cent, respectively. Goyal and Etihad currently own stakes of 51 per cent and 24 per cent in Jet Airways, respectively.
Accroding to reports, the lenders are also looking at converting the existing debt of Rs 1,000 crore into equity type of products through cumulative redeemable preference shares, which will be repaid over a period of 15 years.
The airline had said it is working on a comprehensive resolution plan towards a turnaround for sustained growth and restoration of financial health. It added that the resolution plan “contemplates various options on the debt-equity mix, proportion of equity infusion by the various stakeholders, and the consequent change in the composition of the company’s board of directors”.
The banks-led provisional debt resolution plan, approved by the Jet Airways board, proposes restructuring under provisions of the RBI to meet a funding gap of nearly Rs 8,500 crore.
In an extraordinary general meeting (EGM) set to be held on 21 February, shareholders of Jet Airways will vote on a proposal to raise its authorised share capital from Rs 200 crore to Rs 2,200 crore through a special resolution.
“Banks will not become promoters (of Jet Airways),” chief financial officer Amit Agarwal said during an analysts call recently while the airline’s CEO Vinay Dube said Jet Airways will remain a professionally-run company where the management reports to the board of directors.
Etihad had earlier offered to buy Jet shares at a 49 per cent discount, at Rs 150 per share, and bail out the carrier.
Etihad’s chief executive officer Tony Douglas had on 15 January written to SBI-led lenders about the possibility of increasing its stake. Etihad, however, wants Jet Airways’ founder and chairman Goyal to step down from the board and his stake to reduced from 51 per cent to 20-22 per cent.