Etihad reportedly just made an offer to sell its entire stake in Jet to the struggling airline’s largest creditor


  • Etihad has formally asked the State Bank of India to purchase its entire stake in the airline.
  • The Emirati carrier has been reluctant to pump more money into the failing airline and increase its 24% stake, which has stalled Jet’s resolution plan.
  • The news comes as a surprise. It was reported last week that Jet had caved into promoter and creditor demands and agreed to pump a fresh round of capital into the struggling airline.
Jet Airways’ resolution plan has been stalled in recent months over disagreements between Etihad and Jet’s consortium of creditors - led by State Bank of India. Etihad has been reluctant to pump more money into the failing airline and increase its 24% stake.

Now, Etihad has formally asked the State Bank of India to purchase its entire stake in the airline, according to media reports. At current share prices, Etihad’s 24% stake is valued at ₹4 billion, less than a fifth of the ₹20.6 billion it invested in 2013.

Not only does the UAE-based carrier want to sell its 24% stake in the airline and its 50.1% stake in Jet Privilege, it also wants its existing loan guarantee for Jet’s $140 million loan from HSBC Dubai to be taken over by SBI.

This essentially leaves Jet’s creditors in control of the airline, and in the absence of another airline’s participation, they have no choice but to let Naresh Goyal make operational decisions.

The news comes as a surprise. It was reported last week that Jet have caved into promoter and creditor demands and agreed to pump a fresh round of capital into the struggling airline.

Sources told the Press Trust of India that Etihad’s investment could be in the region of ₹16 billion-₹19 billion, raising its stake by 0.9 percentage points to 24.9% and giving it two additional board seats.

This, in addition, to a ₹7.5 billion emergency loan and ₹10 billion in fresh equity from Jet’s creditors could have helped the airline, which has debts of $1 billion, get back on its feet.

While they’re getting Etihad’s stake at a discounted price, Jet’s creditors will have to drum up the funds that Etihad was supposed to invest in the airline’s revival. If Jet Airways were to fail, it would lead to a significant rise in bad loans - something the government wishes to avoid.

In fact, the Indian government called for an emergency meeting yesterday as Jet’s pilots and staff threatened a strike over the non-payment of salaries and additional planes were grounded.


SEE ALSO:

Jet Airways’ revival delayed by Etihad’s hard bargain

Lenders’ plan to keep Jet Airways' afloat may put Etihad in the cockpit

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