The fate of Jet Airways continues to hang in balance. Gulf airline Etihad and lenders to Jet Airways have been interacting over the past two days to discuss ‘emergency funding’ that Etihad would release to the cash-strapped airline.
The amount under consideration is around $35 million which would last the next few weeks during which Etihad, along with banks, plans to approach capital market regulator Sebi on the pricing for fresh equity — as laid down in Reserve Bank of India’s February 12, 2018, circular and the regulator’s rules on issue of capital and disclosure requirements.
“The situation is still fluid. No firm decision has been reached on the funding or its structure. But the reality is that the airline needs money at the earliest. If it goes south, everyone will have to pay — 22,000 employees, banks, promoters, minority shareholders and passengers,” a person familiar with the negotiations told ET.
“Etihad is working on a suitable structure to release the funds,” said the person.
The Gulf airline’s legal counsel is learnt to have advised the airline that RBI’s revised framework on resolution of stressed assets provides for certain relaxations which could enable Etihad to chip in equity.
One of the options for Etihad is to tap Jet Privilege Pvt Ltd (JPPL) for providing the emergency line. JPPL makes periodic payments to Jet Airways and the last payment was made in October when it reimbursed $35 million in line with its prepaid ticket purchase agreement, a much-needed cash infusion that helped Jet pay bills. At that time, the company had said it was a normal course of business.
Jet Airways owns 49.9% of JPPL. The rest (50.1%) is held by Etihad Airways, which also owns 24% of Jet Airways. While JPPL’s valuation is not known, a report by global independent consultant On Point, had pegged it at $1.13 billion.
JPPL was ranked at 31, ahead of Etihad’s loyalty business at 38 with a valuation of $765 million. Etihad bought its stake in JPPL in 2014, valuing it at $300 million. Memberships have trebled since then to 8.5 million from 2.8 million.
23/01/19 Sugata Ghosh/Economic Times
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The amount under consideration is around $35 million which would last the next few weeks during which Etihad, along with banks, plans to approach capital market regulator Sebi on the pricing for fresh equity — as laid down in Reserve Bank of India’s February 12, 2018, circular and the regulator’s rules on issue of capital and disclosure requirements.
“The situation is still fluid. No firm decision has been reached on the funding or its structure. But the reality is that the airline needs money at the earliest. If it goes south, everyone will have to pay — 22,000 employees, banks, promoters, minority shareholders and passengers,” a person familiar with the negotiations told ET.
“Etihad is working on a suitable structure to release the funds,” said the person.
The Gulf airline’s legal counsel is learnt to have advised the airline that RBI’s revised framework on resolution of stressed assets provides for certain relaxations which could enable Etihad to chip in equity.
One of the options for Etihad is to tap Jet Privilege Pvt Ltd (JPPL) for providing the emergency line. JPPL makes periodic payments to Jet Airways and the last payment was made in October when it reimbursed $35 million in line with its prepaid ticket purchase agreement, a much-needed cash infusion that helped Jet pay bills. At that time, the company had said it was a normal course of business.
Jet Airways owns 49.9% of JPPL. The rest (50.1%) is held by Etihad Airways, which also owns 24% of Jet Airways. While JPPL’s valuation is not known, a report by global independent consultant On Point, had pegged it at $1.13 billion.
JPPL was ranked at 31, ahead of Etihad’s loyalty business at 38 with a valuation of $765 million. Etihad bought its stake in JPPL in 2014, valuing it at $300 million. Memberships have trebled since then to 8.5 million from 2.8 million.
23/01/19 Sugata Ghosh/Economic Times
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