Naresh Goyal the founder chairman of Jet Airways, India’s oldest private sector airline and his wife Anita Goyal have stepped down from the airline’s board, the airline said Monday. Goyal has also resigned as chairman.
Lenders to Jet have taken over the company’s management and board. The lenders will shortly initiate an auction process to find a new strategic investor for the company.
A person close to the development said lenders will now own slightly more than half of Jet, while Goyal’s shareholding will reduce to half of his earlier holding of 50.1%. The airline’s lenders led by the State Bank of India will further infuse Rs 1,500 crore into the company via debt instruments “against security of its assets”, Jet said in a statement to the Bombay Stock Exchange.
An “interim management committee” led by the lenders has been created to manage the daily operations and cash flow of the beleagured airline, the statement said.
Jet facing the worst financial crisis of its 25 year old existence has defaulted on loan payments and payments to its vendors, delayed salaries, grounded a majority of its planes and cancelled hundreds of flights in the last few months.
The writing on the wall had become clear a few days ago when SBI asked Goyal and three fellow director to resign in view of the airline edging closer to the brink after more and more planes began getting grounded every week for lack of funds. SBI, the lead lender of the consortium that extended loans to Jet, also clearly signalled that it would not be picking up Etihad's 24% stake.
SBI chief Rajnish Kumar, however, had insisted that forcing the airline out of business was a bad idea. “We believe that it is in everybody’s interest that Jet Airways continues to fly,” he said.
As reported by ET, the MoU on the fund infusion plan required Jet's lenders to convert debt into 11.4 million shares. The airline had already enhanced its share capital and as a next step, was supposed issue fresh shares via a rights issue. Under the MoU, Etihad was supposed to infuse Rs 1,600-1,900 crore for a 24.9% stake, just below the 25% threshold which necessitates an open offer.
Lenders were to pump in another Rs 1,000 crore for a 29.5% stake. The carrier's debt worth about Rs 450 crore was to be converted into equity. As per the plan, Goyal — who had already put in Rs 250 crore, would see his holding at about 17.1% and not more than 22%.
Etihad had earlier put a big spanner in Goyal plans by refusing to play ball if the restructuring strategy for Jet was not reworked. The UAE airline said it would not infuse emergency funds of Rs 750 crore if it didn't find the resolution plan acceptable. Jet's prospects went from bad to outright bleak after Etihad dug in its heels and said it won't be part of the fundraising plan drawn up by the consortium. This left Jet's lenders with practically no option to save the drowning airline.
Naresh Goyal had tried every trick in the book to keep from ceding control of the airline he founded 25 years ago. When pressure from creditors reached a crescendo, he had reportedly agreed to step down as chairman, albeit with a big rider attached — that his son Nivaan be allowed to take his place at the helm.
Signs of the coming crisis were evident as early as mid-December last year when Nikos Kardassis, widely hailed as Naresh Goyal's turnaround man, abruptly left Jet. The Greek-American aviation veteran, whom Goyal had brought in to help him turn Jet around, went on leave but never returned.
25/03/19 Economic Times
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Lenders to Jet have taken over the company’s management and board. The lenders will shortly initiate an auction process to find a new strategic investor for the company.
A person close to the development said lenders will now own slightly more than half of Jet, while Goyal’s shareholding will reduce to half of his earlier holding of 50.1%. The airline’s lenders led by the State Bank of India will further infuse Rs 1,500 crore into the company via debt instruments “against security of its assets”, Jet said in a statement to the Bombay Stock Exchange.
An “interim management committee” led by the lenders has been created to manage the daily operations and cash flow of the beleagured airline, the statement said.
Jet facing the worst financial crisis of its 25 year old existence has defaulted on loan payments and payments to its vendors, delayed salaries, grounded a majority of its planes and cancelled hundreds of flights in the last few months.
The writing on the wall had become clear a few days ago when SBI asked Goyal and three fellow director to resign in view of the airline edging closer to the brink after more and more planes began getting grounded every week for lack of funds. SBI, the lead lender of the consortium that extended loans to Jet, also clearly signalled that it would not be picking up Etihad's 24% stake.
SBI chief Rajnish Kumar, however, had insisted that forcing the airline out of business was a bad idea. “We believe that it is in everybody’s interest that Jet Airways continues to fly,” he said.
As reported by ET, the MoU on the fund infusion plan required Jet's lenders to convert debt into 11.4 million shares. The airline had already enhanced its share capital and as a next step, was supposed issue fresh shares via a rights issue. Under the MoU, Etihad was supposed to infuse Rs 1,600-1,900 crore for a 24.9% stake, just below the 25% threshold which necessitates an open offer.
Lenders were to pump in another Rs 1,000 crore for a 29.5% stake. The carrier's debt worth about Rs 450 crore was to be converted into equity. As per the plan, Goyal — who had already put in Rs 250 crore, would see his holding at about 17.1% and not more than 22%.
Etihad had earlier put a big spanner in Goyal plans by refusing to play ball if the restructuring strategy for Jet was not reworked. The UAE airline said it would not infuse emergency funds of Rs 750 crore if it didn't find the resolution plan acceptable. Jet's prospects went from bad to outright bleak after Etihad dug in its heels and said it won't be part of the fundraising plan drawn up by the consortium. This left Jet's lenders with practically no option to save the drowning airline.
Naresh Goyal had tried every trick in the book to keep from ceding control of the airline he founded 25 years ago. When pressure from creditors reached a crescendo, he had reportedly agreed to step down as chairman, albeit with a big rider attached — that his son Nivaan be allowed to take his place at the helm.
Signs of the coming crisis were evident as early as mid-December last year when Nikos Kardassis, widely hailed as Naresh Goyal's turnaround man, abruptly left Jet. The Greek-American aviation veteran, whom Goyal had brought in to help him turn Jet around, went on leave but never returned.
25/03/19 Economic Times
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