Over five companies are said to have given expressions of interest (Eo-Is) in taking up stakes in the ailing Jet Airways which was put on sale by lenders. However, the Wednesday deadline has been extended by two days by the lenders, expecting that partner Etihad Airways will also submit EoI.
The names of the investors couldn’t be ascertained but both people cited above said the Eo-Is were either “non-serious” or lacked critical details on how the bidders will recapitalise Jet. This is the first stage of the bidding process and the EoIs are non-binding.
“As part of the (bidding) process, we are in receipt of some EoIs and some more persons have expressed desire to participate if additional time is provided,” said a spokesperson of SBI Capital Markets, which is overseeing the process. “Accordingly, in order to allow better participation in the process the domestic lenders have agreed to extend the timeline for submission of Expressions of Interest which have been updated and made available on the websites.”
Lenders led by State Bank of India have been trying to persuade Etihad, which owns 24% of Jet, to increase its investment to help revive the carrier. Etihad though has been insisting on an exemption from the takeover norm that requires investors to make an open offer for a further 20% stake if they exceed a 25% threshold.
TATA GROUP NOT TOO KEEN
Etihad’s board is supposed to take a decision on whether to invest further in Jet.
Meanwhile, Jet continued to grapple with financial woes. Indian Oil Corp. (IOC) stopped supplies to it between 3 pm and 8:30 pm, forcing it to delay all flights till after 9 pm, according to two people aware of the matter. Moreover, a cargo agent in Jet’s main global hub Amsterdam seized a Boeing 777 plane’s bellyhold cargo in the afternoon, grounding the aircraft, sources said.
“Flight 9W 231from Amsterdam to Mumbai of April 10 was cancelled due to operational reasons,” Jet said, without elaborating. “Guests… are being re-accommodated.”
Since Tuesday, Jet has been flying 22 planes, down from 124 in December. Jet disputed this, saying it still has 26 planes flying.
On Wednesday evening, the airline’s founder Naresh Goyal signed an agreement to pledge more shares. The stake he’s pledged is now up to 41.1% out of his total 51% holding. The lenders have however approved Goyal retaining a 9.9% shareholding in the airline that will be unencumbered, which means that it will not have to be pledged. In effect, this means he will continue to have a presence in the airline.
MORE ON THE BLOCK
Goyal’s move will allow the lenders to put a higher number of shares on the block as part of a revival plan, up from 31.2%. The lenders’ plan to take over more than 50% of Jet’s shares was stalled following a recent Supreme Court judgement that quashed a Reserve Bank of India circular that overhauled rules for debt restructuring. The lenders are pushing hard for a rescue to stave off Jet’s referral to bankruptcy court.
The Tata Group, speculated to be a strong contender, doesn’t appear to be interested in participating in the process. A person close to the group said it has invested heavily in building two brands — Vistara and AirAsia India —and buying another airline doesn’t make business sense. Instead, picking up routes abandoned by Jet Airways would be more advantageous.
SBI, Etihad, Tata Sons and IOC didn’t respond to queries.
Jet has grounded planes, delayed salaries, defaulted on loans and laid off staff. Its management has estimated the airline won’t survive beyond April without a fund infusion. The delay is said to be a concern for the aviation ministry, which feels that this will hurt revival chances.
“The banks are under pressure to find a solution to the Jet Airways crisis but delays are hampering the prospects of revival further,” said a senior aviation ministry official. “Delay in finding a way out for the airline is only taking the airline to a point of no return.”
Apart from extending the deadline, the lenders also issued clarifications on bid requirements. An investor will have to specify how much equity it intends to pick up and the amount of debt it will take on. The bid document had said earlier that the new owner will take over control and management of Jet and settle its obligations.
Lenders have initiated the bidding process as Jet was unable to honour its debt obligations, the bid document said. The fund infusion can be by way of loans, according to clarifications. The shares can be taken over either via acquisition or subscription, the clarification said.