In a surprise development, Etihad Airways submitted a conditional offer to re-invest in the grounded Jet Airways on Friday just before the deadline ended for putting in binding bids. While Etihad’s offer has been declared as the only serious bid, the Abu Dhabi-based airline has made it clear that it will hold only a minority stake in the company and that its bid is conditional.
Earlier in the day, State Bank of India chairman Rajnish Kumar at a press conference to announce financial results had said that he was expecting a serious bid, apart from the two unsolicited ones which had already been submitted, thereby building up a suspense. Kumar didn’t give out Etihad’s name but the conjectures had begun on who the surprise bidder was.
The bid from Etihad, which held 24 per cent in Naresh Goyal-founded Jet Airways, came in the last half an hour before the deadline on Friday. It hinges on multiple conditions, including availability of a majority partner, conversion of debt into equity and lenders agreeing to a substantial haircut to their exposure. In other words, Etihad’s bid is no guarantee that Jet could fly again, analysts pointed out.
“Etihad Airways today confirmed its interest to re-invest in a minority stake in India’s Jet Airways, subject to conditions. India is one of the fastest-growing air transport markets in the world, and a significant economic partner of the UAE. Etihad has been working consistently with key stakeholders in India over the past 15 months to help find a solution which would ensure Jet’s return as a viable and competitive Indian airline, and continues to do so,” the airline said in a statement.
SBI Caps, which has conducted the bidding on behalf of the lenders’ consortium, said banks would now examine the bid and also decide on the legality of two unsolicited bids which have been received. The unsolicited bids came from UK-based entrepreneur Jason Unsworth and a London-based firm Adi Partners. Other shortlisted bidders, including TPG Capital, Indigo Partners and National Infrastructure Investment Fund, did not submit binding bids on Friday.
“Sealed bid from Etihad Airways PJSC has been received and the same will be submitted to lenders for examination. Few unsolicited offers have also been received which the lenders may deliberate upon subsequently,” a statement from SBI Caps said.
While this is a positive sign for the rescue of Jet Airways, sources aware of the development said any revival depends on the availability of a majority partner who can co-invest along with Etihad.
“There have been talks between banks, Etihad and few large corporate houses in the past few weeks but nothing substantial came out of it. It’s imperative that a new investor- preferably a big corporate house agrees to partner with Etihad,” a person in the know said.
The other hurdle remains the conversion of debt into equity. As part of the resolution plan, the SBI-led consortium of lenders had earlier proposed to convert the airline’s debt into equity for a notional value of Re 1 for a 51 per cent stake in the distressed company.
However, the move was stalled after the Supreme Court quashed RBI’s February 12 circular allowing such conversions in companies with negative net worth.
The debt equity conversion will allow the company to issue additional shares through which Etihad will first dilute its stake from the current 24 per cent. In the second stage, Etihad will be able to reinvest through a rights issue, to increasing its stake.
Earlier in the day, State Bank of India chairman Rajnish Kumar at a press conference to announce financial results had said that he was expecting a serious bid, apart from the two unsolicited ones which had already been submitted, thereby building up a suspense. Kumar didn’t give out Etihad’s name but the conjectures had begun on who the surprise bidder was.
The bid from Etihad, which held 24 per cent in Naresh Goyal-founded Jet Airways, came in the last half an hour before the deadline on Friday. It hinges on multiple conditions, including availability of a majority partner, conversion of debt into equity and lenders agreeing to a substantial haircut to their exposure. In other words, Etihad’s bid is no guarantee that Jet could fly again, analysts pointed out.
“Etihad Airways today confirmed its interest to re-invest in a minority stake in India’s Jet Airways, subject to conditions. India is one of the fastest-growing air transport markets in the world, and a significant economic partner of the UAE. Etihad has been working consistently with key stakeholders in India over the past 15 months to help find a solution which would ensure Jet’s return as a viable and competitive Indian airline, and continues to do so,” the airline said in a statement.
SBI Caps, which has conducted the bidding on behalf of the lenders’ consortium, said banks would now examine the bid and also decide on the legality of two unsolicited bids which have been received. The unsolicited bids came from UK-based entrepreneur Jason Unsworth and a London-based firm Adi Partners. Other shortlisted bidders, including TPG Capital, Indigo Partners and National Infrastructure Investment Fund, did not submit binding bids on Friday.
“Sealed bid from Etihad Airways PJSC has been received and the same will be submitted to lenders for examination. Few unsolicited offers have also been received which the lenders may deliberate upon subsequently,” a statement from SBI Caps said.
While this is a positive sign for the rescue of Jet Airways, sources aware of the development said any revival depends on the availability of a majority partner who can co-invest along with Etihad.
“There have been talks between banks, Etihad and few large corporate houses in the past few weeks but nothing substantial came out of it. It’s imperative that a new investor- preferably a big corporate house agrees to partner with Etihad,” a person in the know said.
The other hurdle remains the conversion of debt into equity. As part of the resolution plan, the SBI-led consortium of lenders had earlier proposed to convert the airline’s debt into equity for a notional value of Re 1 for a 51 per cent stake in the distressed company.
However, the move was stalled after the Supreme Court quashed RBI’s February 12 circular allowing such conversions in companies with negative net worth.
The debt equity conversion will allow the company to issue additional shares through which Etihad will first dilute its stake from the current 24 per cent. In the second stage, Etihad will be able to reinvest through a rights issue, to increasing its stake.
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