Cash-strapped Jet Airways on Monday defaulted on foreign loan repayments due to liquidity crunch, even as chairman Naresh Goyal seeks Rs 750 crore in urgent funding from its strategic partner Etihad Airways citing the airline's "very precarious" position.
Jet Airways, which has been in service for 25 years, has been grappling with acute financial woes that have forced it to ground around 50 planes, while salaries of many employees have been delayed.
"The part repayment of the external commercial borrowing availed by the company for working capital purposes, falling due on March 11, 2019, has been delayed owing to temporary liquidity constraints," Jet Airways said in a filing to stock exchanges. Specific details about the borrowings were not disclosed.
Jet Airways has engaged with the lender in relation to the same, the filing added. Jet Airways has a debt burden of more than Rs 8,000 crore and has been looking at various ways to raise funds.
On March 8, Goyal wrote to Etihad Airways Group CEO Tony Douglas, seeking urgent funding of Rs 750 crore. In a letter, Goyal also said Jet Airways has secured the go-ahead from the civil aviation ministry to pledge its shares in JetPrivilege for securing the interim funding. Jet Airways holds 49.9 per cent stake in the loyalty programme JetPrivilege, while the majority is with Etihad.
According to the letter, Jet Airways is in a very precarious position, with more than 50 aircraft being grounded and increasing arrears of vendors and salaries. Etihad Airways is likely to infuse around Rs 1,600-1,900 crore into cash-strapped Jet Airways under a proposed deal wherein Goyal would step down as chairman of the domestic carrier, according to sources. Under a proposed deal, Goyal would step down as chairman and director of Jet Airways but can nominate two people to the airline's board.
Goyal would be designated as chairman emeritus while his son Nivaan Goyal would be offered an appropriate executive position subject to certain conditions, the sources said.
By infusing Rs 1,600-1,900 crore, Etihad's stake in Jet Airways would rise to 24.9 per cent, the sources said citing a memorandum of understanding (MoU) between the two airlines. Currently, Etihad has 24 per cent stake in the domestic airline.
Besides, a new investor is likely to pump in around Rs 1,600-1,900 crore into Jet Airways. Lenders are expected to infuse Rs 1,000 crore wherein their shareholding would be around 29.5 per cent, as per the sources.
In the revamped board, there would be a total of 12 members, including two nominees each of Goyal and Etihad, they added.
Last month, shareholders of Jet Airways cleared approved conversion of loan into shares and other proposals. On February 14, Jet Airways' board approved a bank-led provisional resolution plan (BLPRP), whereby lenders would become the largest shareholders in the airline. Following approval from the shareholders, part of debt would be converted into 11.4 crore shares at a consideration of Rs 1 apiece as per the RBI norms.
On Monday, shares of Jet Airways settled with over 2 per cent gains, following reports that it had secured a loan of over Rs 2,000 crore from Punjab National Bank (PNB).
In a clarification to stock exchanges, the airline said it has existing credit facilities of $300 million from Punjab National Bank. No fresh credit facilities, as reported, have been provided by the bank, it added.
Separately, on Monday, Jet Airways said it is not operating any of the five Boeing 737 MAX in its fleet.
The statement of the airline came against the backdrop of aviation regulator DGCA asking airlines to undertake safety assessment of 737 MAX aircraft following the crash of such a plane in Ethiopia on Sunday.