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Goyal seeks Rs 750 crore from Etihad to keep Jet Airways flying

Jet Airways Founder-Chairman Naresh Goyal, in a communication to Etihad group Chief Executive Officer Tony Douglas, has said the airline is in a “precarious” position, with more than 50 planes grounded. Goyal has sought Rs 750 crore immediately from Etihad, while raising concerns over “increasing arrears of vendors and salaries’’ at Jet.

This coincides with Jet Airways informing the exchanges that it has defaulted on part payment of a foreign loan due to liquidity constraints. The part payment was due on external commercial borrowing on March 11. The amount of the default could not be ascertained, but reports suggest that there was a $150-million loan repayment due by March end.


It is learnt that under the proposed bank-led resolution plan to rescue Jet, lenders will infuse Rs 750 crore and Etihad will have to procure funding for the company either itself or through an offshore or on shore lender for a matching amount as the lenders. This is subject to board approval, regulatory clearances, and a valid creation of a pledge over not less than 34.9 per cent of the total issued equity capital of Jet Privilege Pvt Ltd (JPPL) in favour of lenders. The MoU hinges on the completion of an interim financing plan of Rs 4,000 crore, which is crucial for the airline’s survival, a source in the know said.

Even as Jet needs immediate funding to keep flying, the Etihad board met on Monday to take up the bank-led resolution plan for discussion.

“As a minority shareholder, Etihad continues to work constructively with the Jet Airways board, management team and other stakeholders,’’ the company said in a statement after the meeting. A nod at the Etihad board meeting is critical for Jet’s rescue.

Just days before the Etihad board meeting, the two partners are learnt to have signed a memorandum of understanding (MoU), signaling an agreement on the bank-led resolution plan.

Detailing the deal contours, the MoU listed out the changed shareholding structure that will bring down Goyal’s stake to 17.1 per cent. It also elaborated on the board composition, non-compete clause that will kick in for the Jet promoter, and negotiation with lessors for extension of leases, among other things.

Although the draft MoU had a clause of capping the promoter group shareholding to 22 per cent through a “perpetuity” requirement after implementation of the resolution plan, the final pact has come with a change. That is, Goyal signed the MoU after dropping the perpetuity requirement. This is significant as Goyal could now increase his stake without any restriction later.

The MoU, which expects Etihad and Goyal to use their best endeavours to support the company in their negotiations with lessors of aircraft to ensure extension of lease, says Jet Airways will be a board run company. Of the 12 board members, Goyal, who till now holds 51 per cent in Jet, will have two nominees (other than himself or his wife Anita), provided that the family shareholding is above 10 per cent and is a promoter of the company. Any increase in the Goyal family shareholding will not entitle the promoters for an additional board seat. Abu Dhabi-based Etihad and the possible new investors—National Investment & Infrastructure Fund (NIIF)– will have two nominees each, while lenders’ consortium will have one. In addition, there will be four independent directors, one of whom will be appointed chairman of the restructured company as Goyal steps down.