The threat of bankruptcy forces Etihad and Naresh Goyal to call for truce

  • Jet chairman Naresh Goyal, released a joint statement along with partner Etihad’s CEO, Tony Douglas, declaring their confidence in the plan to make Jet Airways financially viable again.
  • The statement came hours after speculative reports of a possible move to bankruptcy court by banks.
  • Banks want Etihad take operational control of Jet, a move opposed by the current chairman Naresh Goyal.
The battle for control over India’s beleaguered Jet Airways may have taken a turn towards resolution. Chairman Naresh Goyal, released a joint statement along with partner Etihad’s CEO, Tony Douglas, declaring their confidence in the plan to make Jet Airways financially viable again.

“Jet Airways, its principal shareholders, including Etihad Airways, and key financial stakeholders are working towards the finalisation and subsequent implementation of the bank-led provisional resolution plan (BLPRP) to ensure the carrier emerges as a financially strong and resilient airline,” said the statement.

The statement has come hours after reports speculated that the company’s biggest lender State Bank of India may drag the airline to bankruptcy court - a move that will hurt everyone involved.

Once the case lands in the National Company Law Tribunal, the control of the company would be handed over to creditors, where a debt repayment plan overseen by court-appointed bankruptcy professional would follow. Without a consensus by the majority of the creditors, the company runs the risk to be liquidated.

The resolution plan, which was formulated by the airline’s creditors received the approval of Jet’s shareholders earlier this week. Etihad had abstained from voting on the resolution proposals, reports said.

Bankers have been keen that Etihad take operational control of the embattled airline, a proposal that the current chairman Naresh Goyal has fought tooth and nail.

However, within hours after reports of a possible move to bankruptcy, Jet Airways and Etihad issued the joint statement.

The bailout plan will see a consortium of banks, led by State Bank of India, take a 51% stake in Jet by converting their debt into equity. It also involves the raising of ₹8.5 billion worth of capital, a quarter of which will come from Goyal and Etihad - which will likely see its 24% stake in the airline rise.

Meanwhile, pilots have also threatened to leave the airline and lessors have sought to seize planes. An anonymous source from the airline told Business Standard that the airline’s employees were anxious and uncertain about the resolution process. The statement was likely intended at preventing the departure of pilots and other employees over unpaid dues.

While the joint statement was high on confidence, it didn’t give much in the way of details or a timeline. Not surprisingly, Jet’s shares opened a mere fraction of a percentage point higher.

The finer details of the plan will likely be made available in the first week of March, when Jet’s creditors sit down with Etihad to discuss capital-raising. Etihad has been extremely rigid about its participation in the bailout, having dealt with the fallout of a number of questionable investments in the recent past.

The first order of business for Jet will be to make good on salary payments and the repayment of ₹17 billion worth of debts maturing by the end of the financial year. As of March 2018, it had total debts of ₹84.1 billion.


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