Day 1 of Jet stake sale fails to draw response, lenders run to stitch Plan B

Mumbai: The first day of the stake sale announced by Jet Airways' lenders failed to elicit any response or expression of interest or queries from prospective bidders, sources familiar with the development said. The airline is offering anywhere between 31.2 percent to 75 percent to prospective bidders. The call for EoIs close on April 10, 6 pm.

Lenders run from pole to pillar to avert IBC proceedings

The lenders are expecting some response by the time the offer closes. The extent of equity on offer is also conditional upon approval from the Reserve Bank of India (RBI) to convert loans into equity. The lenders are trying their best to avert Insolvency and Bankruptcy Code (IBC) proceedings from being initiated against Jet. However, the possibility draws ominously closer if the crisis is not mitigated soon.

Meanwhile, the consortium of lenders, led by the State Bank of India (SBI), has ramped up engagement with Etihad Airways — Jet's second-largest shareholder that wants an exemption from a capital markets rule to consider re-investing in it — as it looks for a resolution with urgency.

They have also got in touch with PE investors, including TPG, and homegrown National Infrastructure Investment Fund (NIIF) as well as US Air Lines, apart from domestic business conglomerates like Tata and Adani groups.

Jet awaits a nod from RBI

After Jet Airways founder Naresh Goyal stepped down as the airline's chairman and the board of the airline on March 25, the lenders had decided to convert loans into equity, after getting an approval from the board. This gave the lenders about 51 percent in the airline. However, after the Supreme Court set aside the RBI's February 12 circular last week, the conversion of loans to equity has been thrown into a state of doubt. Consequently, Jet's shareholding structure remains the same now: with 51 percent stake owned by Goyal, 24 percent with Etihad and the rest with the public.

Currently, the lenders can only offer around 32 percent of the airline's shares that had been pledged with them by Goyal, a senior SBI official said. Banks now await approval from the RBI.

What happens if the approval does not come?

If the approval does not come, a prospective buyer or a group of buyers can only buy 31.2 percent and can then make an open offer and increase their stake beyond 51 percent.

"But there is no time to wait for approvals or a new circular as Jet needs urgent cash. So the lenders and SBI Capital Markets have opened up the process and are trying to work out a solution with Goyal and Etihad on how to put more shares on the block," said the source.

The debt on Jet Airways totals Rs 8,500 crore.