Tough times for Jet Airways: No help from Naresh Goyal, Etihad Airways; lenders only hope left even as stock rises

Investors were quite upbeat on debt-laden Jet Airways on Friday’s trading session, so much, that the airline’s stock rose by over 6% in one day on Sensex. At around 1057 hours, Jet Airways was trading at Rs 232.05 per piece up by Rs 9.25 or 4.15%, however, the stock has touched an intraday high of Rs 236.90 per piece on Sensex. Such optimism was despite, the airline announcing on grounding another set of aircraft due to non-payment. Shockingly, investors' faith has been restored due to buzz, that the airline’s man-in-charge Naresh Goyal has agreed to step down from the board. Meanwhile, no hope is being seen from Etihad Airways as well. With this, Jet Airways only saviors are consortium of lenders led by State Bank of India (SBI) who are working hand-in-hand with a debt resolution plan. 

A source with direct knowledge told Reuters that, Jet Airways' founder Naresh Goyal has agreed to step down as chairman of the airline's board, as the cash-trapped  Indian carrier inches closer to securing a rescue deal. Reportedly, it was also known that, Etihad is meanwhile restraining from providing interim funding of about 7 billion rupees ($99 million) to Jet Airways.

While asked about the matter, Jet has not responded. But looks like investors have given their thumbs up to the new buzz. 

 However, the development comes after when an meeting was carried between SBI with Goyal and Etihad’s chief Tony Douglas. 

On Thursday, the airline stated that, additional 6 aircrafts have been grounded due to non-payment of amounts outstanding to lessors under their respective lease agreements. With this, Jet has grounded a total 13 aircraft in 2 days time, as on Wednesday, the airline grounded seven alone citing same reason. 

Lenders the only savior! 

Currently, a plan has been discussed and approved between Jet Airways and lenders, under which the airline’s debt will be converted into 11,40,00,000 shares of Rs. 10/- each by allotment of such number of equity shares to the Lenders that would result in the Lenders becoming the largest shareholders in the Company. 

The cost of converting debt to equity is set at a consideration price of Re 1. While lenders will nominate their own members in Jet Airways board of directors. Also, sanction of appropriate interim credit facilities by domestic lenders on terms to be agreed.

At present, Goyal holds about 5,79,33,665 equity shares in Jet Airways - which is 51% of the airline’s share capital as on December 2018. The second holder is Etihad who has 24%. Buzz is that, after the resolution plan, both the shareholders will see their holding down in half, which means Goyal’s holding will become 25.5% and Etihad’s by 12%.