This had been one of Etihad’s conditions for providing funds to the airline, which needs Rs 750 crore immediately. The board of the Abu Dhabi carrier, which has a 24 per cent stake in Jet, hasn’t approved the funding because of Goyal’s insistence on waiver of the clause, said people with knowledge of the matter. On the other hand, Indian banks have refused to infuse any money until the promoter stake is cut from the current 51 per cent .
“Etihad’s first condition was limiting Goyal’s stake to 22 per cent or below and was agreed upon in the memorandum of understanding (MoU) but a waiver sought later has led to Etihad pulling back on funding,” said one of those cited above.
Any restructuring plan hinges on Etihad infusing capital and unless that happens there will be no deal, according to the bankers.
According to the plan, the airline is set to get an infusion of Rs 4,000 crore from various stakeholders but has received only Rs 250 crore from Naresh Goyal thus far.
A relaxation in the 22 per cent cap would give Goyal a chance to regain control of the airline, which has been forced to cancel flights as 53 planes have been grounded because lease rentals haven’t been paid. The stock fell 1.3 per cent to Rs 237.80 on Thursday. The lenders want Goyal’s exit clause formalised before any fresh funding is provided, according to two senior bankers aware of the development.
“If he has indicated that he will be involved in a non-operational role, that needs to documented and formalised. We are looking for more clarity on that issue,” said one of them, indicating that the banks don’t want the existing promoter to have any role in management.
Another banker said that the new funding will come with curbs and cannot be used to retire old debt. “There may be some exemptions but the airline will not be paying off its foreign borrowings through fresh bank infusion,” he said.
Separately, Bank of India said it is ready to provide emergency funding to Jet but only if other lenders are also willing to put more funds in line with their exposure. Another lender, Punjab National Bank, also said that any decision on funding the cash-strapped airline will be taken collectively and not on a standalone basis.
Goyal’s exit plan is part of the draft March 8 MoU. According to this, Goyal will immediately step down as chairman and director and cease to hold an executive role.
He will hold the honorary post of chairman emeritus until 2025. Goyal will be able to nominate two members — other than himself and wife Anita — to the board. Nivaan Goyal, his son, will be considered for an executive position.
However, on the same day, Naresh Goyal wrote to Etihad group CEO Tony Douglas seeking a waiver on the “perpetuity requirement of capping the promoter shareholding to 22 per cent ”.
This prompted Etihad to refrain from approving any bailout for the beleaguered carrier at its board meeting on Monday. The proposal was deferred to a later date, said the people cited above. Etihad and Jet Airways didn’t respond to queries.
Due to delays in payment, Jet Airways has defaulted on external commercial borrowings of $140 million from HSBC Ltd taken in 2014 and due on March 11, 2019. Etihad Airways is the loan guarantor. Jet Airways has, however, been paying Indian banks on time and their accounts with the airline are now deemed ‘standard’.
According to the draft MoU, the lenders will convert a portion of their loans into equity. Jet Airways’ 49 per cent stake in Jet Privilege will be pledged with them to raise money.
The proposal does not mention the name of the new investor, but ET has learnt that it is likely to be the National Investment and Infrastructure Fund (NIIF), in which the Abu Dhabi Investment Authority is a participant. If the proposal is accepted, it would mean Goyal will no longer have a say in running the firm.
That will devolve on Etihad and NIIF, which will invest up to Rs 1,900 crore each. Etihad will put up Rs 750 crore as interim funding. Goyal has to invest Rs 700 crore, of which Rs 250 crore has already come to the airline.