Mumbai: Stressed carrier Jet Airways has asked its partner Etihad Airways to back loans worth $150 million (Rs 1,050 crore) that it plans to raise from overseas banks to keep its operations running, said two people in the know.
India’s second biggest airline by market share has made this proposal even as it undergoes a forensic investigation directed by its top local lender.
An Etihad spokesperson said the airline “does not comment on rumour or speculation”. An email to Jet didn’t yield a response before the story went to press. Etihad currently owns 24% stake in Jet. The airline’s chairman Naresh Goyal has been asking owners of the Abu Dhabi-based airline to put in fresh equity, according to people in the know.
But Etihad wants a 49% stake in the Jet—the maximum a foreign carrier is allowed to own in its Indian peer according to current norms— which would mean a narrowing of Goyal’s holdings, a proposition Goyal isn’t agreeing to.
Jet, burdened with losses and debt and with too little cash to pay salaries or plane lease rentals regularly, needs funds to stay afloat and keep its operations running. With talks on equity infusion making no headway yet, debt raising is the only immediate option, said the people cited above. The airline already has more than Rs 8,000 crore of debt on its books.
Jet’s board met Thursday to take stock of its financial restructuring and fundraising plans.
Backing loans raised by Jet would mean the creditors can turn to Etihad if its Indian partner fails to repay. Etihad hasn’t yet agreed to the proposal, said the people cited above. It would “be surprising” if it does, they said. “The risks would be extremely high in backing such loans,” said one of them.
22/12/18 Anirban Chowdhury/Economic Times
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India’s second biggest airline by market share has made this proposal even as it undergoes a forensic investigation directed by its top local lender.
An Etihad spokesperson said the airline “does not comment on rumour or speculation”. An email to Jet didn’t yield a response before the story went to press. Etihad currently owns 24% stake in Jet. The airline’s chairman Naresh Goyal has been asking owners of the Abu Dhabi-based airline to put in fresh equity, according to people in the know.
But Etihad wants a 49% stake in the Jet—the maximum a foreign carrier is allowed to own in its Indian peer according to current norms— which would mean a narrowing of Goyal’s holdings, a proposition Goyal isn’t agreeing to.
Jet, burdened with losses and debt and with too little cash to pay salaries or plane lease rentals regularly, needs funds to stay afloat and keep its operations running. With talks on equity infusion making no headway yet, debt raising is the only immediate option, said the people cited above. The airline already has more than Rs 8,000 crore of debt on its books.
Jet’s board met Thursday to take stock of its financial restructuring and fundraising plans.
Backing loans raised by Jet would mean the creditors can turn to Etihad if its Indian partner fails to repay. Etihad hasn’t yet agreed to the proposal, said the people cited above. It would “be surprising” if it does, they said. “The risks would be extremely high in backing such loans,” said one of them.
22/12/18 Anirban Chowdhury/Economic Times
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