The last time the government bought an airline goes as far back as as the 1950s when Tata run Air India was nationalised. A similar scenario is brewing in 2019, only it is a lot different. There is a buzz that Jet Airways may well be ''nationalised''! However, as we said, the situation is different. This may well happen, but that is through its lenders - Jet Airways owes crores to its lenders. This is gradually becoming clear as a new resolution plan has been finally accepted by the private carrier’s board. For the current 'pilot' of Jet Airways, Naresh Goyal, this will be a sad event as although his airline has finally got a lifeline, yet it is on the verge of slipping away from his hands. It may happen that Goyal will no longer be able to retain control of Jet Airways. On Friday, the share price of Jet Airways rose by nearly 8% after touching an intraday high of Rs 242.85 per piece.
Notably, Jet Airways has accepted its lenders debt resolution plan. In a filing to exchanges, Jet Airways said, “Jet Airways’ Board considered and approved a Bank led Provisional Resolution Plan (BLPRP). The BLPRP proposes restructuring under the provisions of the “RBI Circular” in order to meet a funding gap of nearly Rs 8500 crores which is to be met by an appropriate mix of equity infusion, debt restructuring, sale/ sale and lease back/ refinancing of aircraft, among other things.”
This funding estimate of Rs 8,500 crore also includes proposed repayment of aircraft debt of Rs 1,700 crore.
What will happen is that the lenders will convert the debt into equity. They will convert Jet Airways debt into 11,40,00,000 shares of Rs. 10/- each by allotment of such number of equity shares to the Lenders that would result in the Lenders becoming the largest shareholders in the Company.
Lenders will allot debt to 114 million shares for a consideration price of Re 1 each under RBI’s guidelines. Banks are allowed to convert debt into equity at INR 1/- when the book value per share of a company is negative. This is not a new movement, a similar plan was used to bailout Vijay Mallya’s Kingfisher Airlines in 2011.
15/02/19 Pooja Jaiswar/ZeeBiz
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Notably, Jet Airways has accepted its lenders debt resolution plan. In a filing to exchanges, Jet Airways said, “Jet Airways’ Board considered and approved a Bank led Provisional Resolution Plan (BLPRP). The BLPRP proposes restructuring under the provisions of the “RBI Circular” in order to meet a funding gap of nearly Rs 8500 crores which is to be met by an appropriate mix of equity infusion, debt restructuring, sale/ sale and lease back/ refinancing of aircraft, among other things.”
This funding estimate of Rs 8,500 crore also includes proposed repayment of aircraft debt of Rs 1,700 crore.
What will happen is that the lenders will convert the debt into equity. They will convert Jet Airways debt into 11,40,00,000 shares of Rs. 10/- each by allotment of such number of equity shares to the Lenders that would result in the Lenders becoming the largest shareholders in the Company.
Lenders will allot debt to 114 million shares for a consideration price of Re 1 each under RBI’s guidelines. Banks are allowed to convert debt into equity at INR 1/- when the book value per share of a company is negative. This is not a new movement, a similar plan was used to bailout Vijay Mallya’s Kingfisher Airlines in 2011.
15/02/19 Pooja Jaiswar/ZeeBiz
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