SBI set to control 15% of debt-stricken Jet Airways

Mumbai: State Bank of India (SBI) will convert part of its loans into a stake of at least 15 percent in Jet Airways Ltd, giving the debt-ridden carrier some much-needed respite, sources aware of the development said. Other creditors to Jet are also expected to make similar conversions of some debt into equity to help keep India's biggest full-service airline alive.

The sources added that Chairman Naresh Goyal's stake would fall lower than 20 percent from 51 percent presently, under a new rescue proposal for the carrier.

Etihad to infuse funds

Jet's foreign partner Etihad Airways PJSC, which has 24 percent stake, is likely to infuse additional funds to take its holding to over 40 percent, the sources said.

In an increasingly competitive market, Jet has struggled with profitability, having piled on US$ 1.1 billion in debt and fallen behind on paying loans and employee salaries. An agreement to keep Jet running would safeguard close to 23,000 jobs.

"Lenders led by SBI have managed the process quickly and with a strategic intent of delivering a rescue package which works for the stakeholders," said Kapil Kaul, South Asia head of CAPA Centre for Aviation. "The key will be the composition of the board and quality of the new directors and the overall governance architecture. This to me is most critical."

Final call not yet taken

The sources added that since the deal is still being negotiated, a final decision hasn't been taken. Spokespersons for SBI, India's biggest bank, and Jet Airways have not responded to emails seeking comment. Jet has called a special general meeting in Mumbai next month to seek approval from shareholders to turn a part or all of its existing debt into equity.