Etihad board is believed to be in two minds on extending an interim funding of Rs 750 crore to Jet Airways, ahead of regulatory approvals to the bank-led resolution plan from the civil aviation ministry, Securities and Exchange Board of India, Competition Commission of India and the overseeing committee of the Indian Banks Association.
The airline s board, which met in Abu Dhabi on Monday to take a view on the interim funding sought by Jet s promoter-chairman Naresh Goyal, has however, officially not communicated its position so far. In response to an email query on the subject, an Etihad spokesperson said, Etihad Airways does not comment on rumour or speculation.
With Etihad not taking a quick decision on providing an interim funding of Rs 750 crore based on which banks would have released a matching amount as part of their resolution plan, Jet is set to face even more troubled times.
As reported by FE, Goyal sought an urgent funding, citing the very precarious position of the airline following the lingering cash flow issues which got amplified after the forced grounding of over 50 of its planes.
I now look forward to your support and cooperation in saving the airline by an urgent fund infusion of `750 crore by early next week, so that a matching contribution from banks is also disbursed, as per the resolution plan, Goyal said in the letter dated March 8 to Etihad CEO Tony Douglas.
Any conditions precedent to the Rs 750-crore infusion by Etihad Airways may please be taken up with the banks and settled bilaterally with them, so that the much-needed funding is made available to Jet Airways early next week, Goyal had said in his letter. He had also warned that if the interim funding is not received at the earliest it will be severely deleterious to the future of the carrier and could even result in its grounding .
As is known, on February 14, the airline s board had approved a debt recast plan whereby the lenders would become the largest shareholders in the airline by converting the debt into equity at a nominal price of `1. The same was approved by the shareholders on February 21.
As reported earlier, a draft memorandum of understanding has been prepared by Jet Airways which has detailed the revival plan relating to fund infusion by the stakeholders. It is this MoU which needs approval of the Etihad board.
The draft MoU, which is based on the bank-led resolution plan, requires Etihad to infuse an equity of between Rs 1,600 and Rs 1,900 crore resulting in its shareholding of 24.9%. The lenders will become the largest shareholder by infusing an equity of `1,000 crore leading to a shareholding of 29.5%.
An amount of Rs 450 crore currently in the form of liabilties owed to the Naresh Goyal promoter group s group entities of Jet Airways plus an infusion of Rs 250 crore that has already been received, totalling `750 crore will be converted into equity shares giving the Naresh Goyal group an equity of 17.1%, down from his current majority stake of 51%.
Further, Goyal s family shareholding in Jet Airways will be capped at 22%.
A new investor will infuse equity to the extent of Rs 1,600-1,900 crore resulting in a shareholding of 20%.
As per the plan, the new board of Jet Airways will have 12 members. There will be two nominees of Naresh Goyal, other than Goyal himself and his wife Anita Goyal. Etihad will appoint two nominees and the new investor will also have the same number of representative on the board. The lenders will have one nominee. In addition, there will be 4 independent directors and 1 executive director who shall be part of the senior management of Jet being the CEO/CFO.
Naresh Goyal will step down as chairman and as a director and will be designated as chairman emeritus which will be an honorary position with no executive role in the business of the company.
Goyal s son Nivaan Goyal will be considered for an executive position subject to evaluation and recommendation by a professional third-party executive assessment agency.
The Naresh Goyal family group will enter into a non-compete agreement which will be valid till it holds at least 10% stake in the company.