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Jet lenders decide against debt-equity swap

Last Updated 19 April 2019, 13:21 IST

The lenders of the troubled private sector carrier Jet Airways have decided not to convert its debt into the equity in a bid to make the recovery of their dues efficient.

“We haven’t transferred any shares to ourselves still. When we sent that proposal to convert debt into equity to our legal team, they advised against it,” a highly placed source among the Jet lenders told DH.

Instead of this, the banks have taken a binding agreement from Jet founder Naresh Goyal, according to which he is supposed to sell his stake as soon as the bankers shortlist the bidder for the company.

“Our focus is on the recovery of the dues. In the debt-equity swap, there are many processes and the costs involved. So the binding agreement makes more sense for us,” the sources said.

If the debt to equity swap would have taken place, Goyal’s stake would have come down from current level of 51% to 25.5%, Etihad’s stake would have halved from 24% to 12% and the public stake would have also halved from current 25% to 12.5%. In this scenario, the bank’s would have been able to take control of the troubled airlines, which they haven’t done till now.

The bankers of Jet, led by the State Bank of India (SBI), have faced lot of criticism since Wednesday, as the airline was forced to ground all its operations owing to the paucity of the funds.

The banks had assured Rs 1,500 crore to Jet but released just Rs 200 crore. A fresh request for Rs 983 crore was rejected.

However, lenders on their part, justified the decision saying that an infusion of Rs 400 crore would have helped Jet survive for only 3-4 days more. “They can’t run airlines completely on the back of bank funds. We already have almost Rs 5,000 crore stuck with them. And we should remember that it’s the depositors’ money that we would be parked with them,” one of the lenders told DH, wishing anonymity.

Jet has net debt of about Rs 8,500 crore on its books. Its dues to lessors and vendors add up to about Rs 3,500 crore. The potential investors have said they would only take on 20% of the airline’s debt.

The bankers have shortlisted four bidders for the Jet auction –Etihad Airways, National Investment and Infrastructure Fund (NIIF), TPG Capital and Indigo Partners – all of whom are supposed to submit their binding bids by May 10.

In case, the negotiations with the potential bidders, don’t get through, bankers are not keen to take Jet to NCLT. “We will go for auctioning as we did in Mallya’s case. We won’t for NCLT. We will sell all his (Goyal’s) pledged shares and assets with us and collect as much amount as possible,” the source said.

Goyal has pledged 31.2% of his stake in Jet with the banks as of date.

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(Published 19 April 2019, 08:20 IST)

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