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Jet lenders make last push to find investors to pick up stake in airline

Arindam Majumder & Aneesh Phadnis/New Delhi/Mumbai 16 May 19 | 01:51 AM

Etihad Airways’ conditional offer to be a minority stakeholder in Jet Airways has thrown lenders into a tizzy. With little signs of any investor willing to buy 76 per cent, the lenders’ consortium led by State Bank of India has now initiated a process to find investors who could hold small stakes along with Etihad.

The lenders are of the opinion that the ownership of Jet Airways can be divided between three entities, each holding 20 per cent, while Etihad could keep 24 per cent. If the lenders fail to find such investors in the next few days, the only option would be to take the airline to an NCLT-led insolvency process, a source in the know said.

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Sources pegged the total investment required by Jet Airways to restart operations at Rs 5,950 crore. Etihad, in its offer, said it would be able to invest only Rs 1,700 crore and acquire only 24 per cent stake. “The total equity need has been assessed at Rs 5,950 crore, of which Rs 1,700 crore can come from Etihad. 

“If another three investors can pick up 20 per cent each, a resolution can be possible. But I reiterate that the situation seems to be extremely difficult," a senior bank executive said. SBI Caps has been told to reach out to prospective investors including companies which have submitted unsolicited bid, another source in a public sector bank pointed out. 

“There are quite a few interested parties who have evinced interest to invest in the company. Etihad’s bid to acquire 24 per cent can form the basis for guidance and can be treated as some sort of a floor for other investors," he said. However, the authenticity of the bids needs to be checked before taking a decision, sources close to the development said. 

“The situation looks to be extremely difficult with Etihad unwilling to relax its conditions. While NCLT is not a favoured route, there will be no other option left," the bank executive said. Jet Airways has a liability of around Rs 15,000 crore, including a bank debt of Rs 8,500 crore.

Etihad, in its conditions, asked for a write off of 80 per cent of the bank debt. As part of the process, SBI Caps, the investment banking subsidiary of SBI, has reached out to various Indian conglomerates and government-owned National Infrast­ructure Investment Fund. It has also started discussion with unsolicited bidders like London-based Adi Partners and Darwin Platform Group, which has investments across various sectors including oil and gas, hospitality and realty.

“SBI Caps called us. We wanted to understand the liability and assets of Jet Airways," Darwin Group’s CEO Rahul Ganpule said, adding that he has offered to invest Rs 14,000 crore to acquire the grounded airline. Sanjay Viswanthan, chairman of AdiGroup, had earlier told Business Standard that the venture is willing to acquire up to 24 percent stake in the airline.

“We will be bidding for 24 per cent stake because we don’t want to trigger an open offer as it will cause a big-value leakage. The 24 per cent stake will be good enough to run the company if we get a right partner," he had said.

An executive of SBI Caps confirmed that discussions have started with the unsolicited bidders. “Discussions are going on but we need to ascertain their seriousness and capability to invest. We have asked them for documents and proofs of investible funds," the executive said.

An executive of a company which has done due diligence for Jet Airways said it would be difficult to find a single entity which has the capability and willingness to acquire Jet Airways. “The cost of recapitalising Jet Airways is increasing every day. Despite grounding operations, the airline has an expenditure of at least Rs 120-130 crore per month where as it is not earning anything. So there should be a large anchor investor willing to take the bet and also amenable to work with Etihad. I don’t think it will be easy," the person said.

Indian rules don’t allow foreign aviation companies to hold more than 49 per cent, making things more complex. “I can count on my fingers the number of Indian conglomerates capable of taking such a large bet," he said.

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