Jet’s partner Etihad submits a conditional bid for the cash-strapped airline — and wants to remain a minority owner

Reuters

  • Bidding for a majority stake of as much as 75% in Jet Airways ended last week, and the airline’s creditors received four bids according to SBI, Jet’s main creditor.
  • While one bid reportedly came from the airline’s employees, another came from Jet’s partner Etihad - which has a 24% stake in the airline.
  • Etihad does not want to be the sole investor in the airline and does not want a majority stake.
  • The UAE-based airline has stipulated that it will invest a maximum amount of ₹17 billion in the airline to retain its minority stake. This investment is contingent on a capital infusion from the banks.

Bidding for a majority stake of as much as 75% in Jet Airways ended last week, and the airline’s creditors received four bids according to SBI, Jet’s main creditor.

Jet’s creditors have taken a majority stake in the airline and are selling their equity holding to recover their dues. The airline has around $1.2 billion in outstanding loans.

Two of the bids came from Jet’s stakeholders itself. While one bid came from the airline’s employees, another came from Jet’s partner Etihad - which has a 24% stake in the airline - as expected.

While hope for a revival still remains, Etihad’s bid indicated the Emirati airline’s desire to limit its participation in Jet’s turnaround.

On May 10th, Etihad submitted a conditional bid for the Jet. It does not want to be the sole investor in the airline and does not want a majority stake.

Moreover, it has stipulated that it will invest a maximum amount of ₹17 billion in the airline to retain its minority stake - 11% of the estimated ₹150 billion needed to kickstart the airline’s revival. This investment is contingent on a capital infusion from the banks.

The terms aren’t surprising. Etihad has, on multiple occasions in the recent past, decided against bailing out the airline.

At this stage, Etihad’s participation is likely a formality. A bidding process without Etihad would have likely raised investors’ concerns.

Etihad’s cautious approach is warranted. It will be hard to revive Jet’s operations given that its planes have either been returned to lessors or taken over by other airlines. It has also lost important flight slots to its rivals.

In the event that a mutually beneficial deal isn’t agreed upon and a stake sale doesn’t take place, Jet’s creditors will have no choice but to refer the airline to bankruptcy court.


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