Banks plan Rs 8200 crore Jet Airways debt restructuring, may take big hit

Banks plan Rs 8200 crore Jet Airways debt restructuring, may take big hit

Mumbai, Jan 18: The countdown has begun for lenders of Jet Airways, which has now been recognised as a stressed borrower, and will require banks to provide for part of their Rs 8,200 crore exposure to the airline in their Q4 results.
State Bank of India (SBI) on Thursday said that lenders are considering a restructuring plan — an acknowledgement that the loan is not viable in the present form.
RBI norms require lenders to make at least 15% provisions on their exposure once a loan is restructured.
The actual hit could be higher, considering that both promoter Naresh Goyal and Etihad, which holds 24% in the ailing carrier, are unwilling to bring in funds without relief in repayment.
Willing to invest Rs 700 crore, provided my stake does not fall below 25%, says Naresh Goyal
Read Also: Naresh Goyal offers to invest Rs 700 crore in Jet Airways, but with conditions
In a statement issued here, SBI said that besides getting the lender’s board clearance, any restructuring plan will need to be approved by RBI, Sebi and possibly the ministry of civil aviation.
Making matters more difficult for the lenders were fresh conditions imposed by Goyal, who said he was willing to invest Rs 700 crore provided his stake does not fall below 25%, while asking for debt relief.
Meanwhile Jet’s minority stakeholders Etihad Airways’ said its investment would be subject to Goyal not holding more than 22% stake. In his letter to SBI, Goyal has warned of “significant cash crunch and imminent grounding”, which the airline is facing. He has also reportedly offered to pledge all his shares if his stake is kept at a minimum 25%.
“Should this not be possible, then I would not be able to infuse any funds or pledge my shares, unless Sebi accords me me an exemption permitting me to increase my reduced stake (if it is to be below 25%) without triggering the Takeover Code,” Goyal’s letter said.
Since debt relief typically involves conversion of loans to equity and fresh equity infusion, bankers will find it difficult to arrive at a restructuring plan that all stakeholders agree to. Goyal’s communication to lenders comes a day after his partner Etihad set fresh conditions for picking up stake in the distressed airline. In a communication to SBI, Etihad Group CEO Tony Douglas sought a written assurance from SEBI exempting Etihad from pricing norms and a requirement to make an open offer. He has also called for Goyal reducing his stake. “Without this approval we are not willing to invest a single penny further,” Douglas’s letter said. Lenders have refused to lobby regulators on behalf of Jet Airways or Etihad on pricing norms for preferential shares but they are still hopeful of a deal between the two partners despite strong posturing by both.