Banks will get into trouble if the rescue eventually fails, like it did in the case of a 2011 debt-to-equity swap at the now-defunct Kingfisher Airlines. So they will probably want to share the risk with a new investor. The name of India’s state-owned National Infrastructure Investment Fund, or NIIF, is doing the rounds.
Indian Airline Rescue,Jet airways sale, air india bailout, air india sale, jet airways, indigo, vistara, Chief Financial Officer Amit Agarwal, Founder Naresh Goyal, Etihad Airways, Etihad Airways Abu Dhabi, indian aviation crisis, Kingfisher Airlines, Etihad, Boeing
For Jet Airways India Ltd., it’s always only about one rupee.
As I wrote last month, the troubled full-service carrier needed to garner an additional 1 rupee (1.4 cents) per available seat kilometer to make up for its cost disadvantage against no-frills rivals. Cutthroat price competition denied it that opportunity, and now banks are picking up a majority stake – at a price of 1 rupee for 114 million shares.
The gamble, which seeks to avoid putting India’s oldest private airline into court-administered bankruptcy, will be put to a shareholder vote on Feb. 21.
Beyond that, the details of the rescue plan are fuzzy.
How much of the airline’s 76.54 billion rupee ($1.08 billion) borrowings will get converted into equity? Between 25 billion and 30 billion rupees, estimates an aviation analyst, while an article in the Business Standard pegs the reduction at 10 billion rupees. On the other hand, Chief Financial Officer Amit Agarwal said on a conference call that the deal with banks would cut the debt burden by (you guessed it) “1 rupee.”
How will new funds enter the business? Founder Naresh Goyal and Abu Dhabi’s Etihad Airways PJSC are expected to bring in equity. But Etihad, which is expected to lead the round, doesn’t want to trigger India’s takeover code, which will then force it to buy shares from minority investors. The solution, according to Livemint, may be a 40 billion rupee rights issue to which lenders (as new equity owners), as well as Etihad and Goyal will subscribe.
Banks will get into trouble if the rescue eventually fails, like it did in the case of a 2011 debt-to-equity swap at the now-defunct Kingfisher Airlines. So they will probably want to share the risk with a new investor. The name of India’s state-owned National Infrastructure Investment Fund, or NIIF, is doing the rounds.
The final picture is still muddy, but the consensus seems to favor 50 percent-plus ownership by banks and the NIIF; a 22 percent to 25 percent stake with Goyal, who currently controls 51 percent; 12 percent with Etihad, diluting the Middle East carrier by half; and the remaining shares with the public.
To this 40 billion rupee equity infusion, add the 17 billion rupee aircraft debt, which can be repaid by selling Jet’s 16 planes and leasing them back. (A Boeing Co. executive reckons that Jet can get up to $300 million, or 21 billion rupees, from the aircraft.)
21/02/19 Bloomberg
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Indian Airline Rescue,Jet airways sale, air india bailout, air india sale, jet airways, indigo, vistara, Chief Financial Officer Amit Agarwal, Founder Naresh Goyal, Etihad Airways, Etihad Airways Abu Dhabi, indian aviation crisis, Kingfisher Airlines, Etihad, Boeing
For Jet Airways India Ltd., it’s always only about one rupee.
As I wrote last month, the troubled full-service carrier needed to garner an additional 1 rupee (1.4 cents) per available seat kilometer to make up for its cost disadvantage against no-frills rivals. Cutthroat price competition denied it that opportunity, and now banks are picking up a majority stake – at a price of 1 rupee for 114 million shares.
The gamble, which seeks to avoid putting India’s oldest private airline into court-administered bankruptcy, will be put to a shareholder vote on Feb. 21.
Beyond that, the details of the rescue plan are fuzzy.
How much of the airline’s 76.54 billion rupee ($1.08 billion) borrowings will get converted into equity? Between 25 billion and 30 billion rupees, estimates an aviation analyst, while an article in the Business Standard pegs the reduction at 10 billion rupees. On the other hand, Chief Financial Officer Amit Agarwal said on a conference call that the deal with banks would cut the debt burden by (you guessed it) “1 rupee.”
How will new funds enter the business? Founder Naresh Goyal and Abu Dhabi’s Etihad Airways PJSC are expected to bring in equity. But Etihad, which is expected to lead the round, doesn’t want to trigger India’s takeover code, which will then force it to buy shares from minority investors. The solution, according to Livemint, may be a 40 billion rupee rights issue to which lenders (as new equity owners), as well as Etihad and Goyal will subscribe.
Banks will get into trouble if the rescue eventually fails, like it did in the case of a 2011 debt-to-equity swap at the now-defunct Kingfisher Airlines. So they will probably want to share the risk with a new investor. The name of India’s state-owned National Infrastructure Investment Fund, or NIIF, is doing the rounds.
The final picture is still muddy, but the consensus seems to favor 50 percent-plus ownership by banks and the NIIF; a 22 percent to 25 percent stake with Goyal, who currently controls 51 percent; 12 percent with Etihad, diluting the Middle East carrier by half; and the remaining shares with the public.
To this 40 billion rupee equity infusion, add the 17 billion rupee aircraft debt, which can be repaid by selling Jet’s 16 planes and leasing them back. (A Boeing Co. executive reckons that Jet can get up to $300 million, or 21 billion rupees, from the aircraft.)
21/02/19 Bloomberg
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