INTERNATIONAL - Etihad Airways has offered to pick up shares of debt-laden Jet Airways Ltd at a 49 percent discount and to immediately release $35 million to bail out the troubled carrier if certain conditions are met, CNBC-TV18 reported.
Shares of Jet Airways, in which Etihad already has a 24 percent stake, fell as much as 7.5 percent to 271.75 rupees ($3.83) in their biggest intraday drop since early December, after CNBC-TV18 reported that Etihad had offered to pay 150 rupees for each share of the Indian airline.
The report cited as its source a letter from Etihad’s CEO Tony Douglas to the State Bank of India, Jet’s biggest lender, about a restructuring plan for the Indian carrier.
While Jet controls over a sixth of its home market, its margins, like that of other local players, have been eroded by high fuel taxes, a weak rupee and intense price competition, leaving it with about $1.14 billion in net debt as at the end of September and a pile of dues to pilots, lessors and vendors.
In fact, some lessors are even exploring the possibility of taking back aircraft, three people familiar with the matter told Reuters last week.
Jet will not be able to continue funding operations beyond the next week, the CNBC-TV18 report cited Douglas as saying in his letter. The Abu Dhabi carrier is willing to inject $35 million at once if some conditions are met, the letter adds.
The letter also warns of the imminent risk of lessors grounding aircraft, the report said.
Jet and Etihad representatives are due to meet in Mumbai with lenders, led by SBI, later in the day to discuss the proposal that involves Etihad increasing its stake, a source with knowledge of the matter said on condition of anonymity.
Jet’s Chief Executive, Vinay Dube, declined to take questions from reporters on the sidelines of an aviation conference in Mumbai, while an Etihad spokesman declined to comment.
According to CNBC-TV18, Etihad wants Jet’s founder and Chairman, 69-year-old Naresh Goyal, to step down from the board and his stake to be slashed to 22 percent from 51 percent.
Goyal’s penchant for control has emerged as a major obstacle as the 25-year-old airline tries to negotiate a rescue deal, Reuters reported last month, citing people who have worked with him.
Etihad is also seeking an exemption from the market regulator on preference pricing and open offer guidelines to invest more for the bailout, the report added.
Under India’s capital markets regulations, Etihad is required to make an open offer to shareholders for a majority of the shares once its stake goes past 25 percent, unless it obtains a rare exemption from the market regulator.
India Ministry of Civil Aviation Secretary R N Choubey on Wednesday told reporters that the ministry had not received an official request from Jet and Etihad for an exemption.
Rival airline SpiceJet Ltd in 2015 reportedly received a waiver from the regulator that allowed promoter Ajay Singh to rescue its finances without making an open offer.
In Jet’s case, there is hope that any regulatory issue could be resolved and a rescue package be finalised within the next month, a source familiar with the matter said.