Burdened by debt, Jet Airways is looking to convert part of its loans to equity as it struggles to stay afloat in a highly competitive market
New Delhi: India’s largest lender State Bank of India is set to take an equity stake of at least 15 percent in Jet Airways India Ltd. as lenders to the carrier plan to convert part of their loans into equity, people with knowledge of the matter said.
Under a new rescue deal in the works, the nation’s biggest full-service airline’s founder Chairman Naresh Goyal’s stake will fall below 20 percent from the current 51 percent, the people said, asking not to be identified as the information is not public. Etihad Airways PJSC, the current equity partner with 24 percent stake, is expected to infuse additional funds to take its total holding to more than 40 percent, they said.
The Mumbai-based carrier has struggled with low fares in an increasingly competitive market, losing money in all but two of the past 11 years. Jet Airways has called an extraordinary general meeting on Feb. 21 in Mumbai, to seek shareholders approval to increase authorized share capital of company by issuing equity and preferred shares.
No final decision has been taken, the people said. Spokesmen for SBI and Jet didn’t immediately respond to emails seeking comment
The carrier is working on “various options on the debt-equity mix, proportion of equity infusion,” the airline said in a statement on Jan. 16. adding the restructuring may lead to a change in the board of the company. – Bloomberg
Also read: Jet Airways to seek investor Etihad’s approval to swap debt for shares
Not a great idea. At one stage, KFA converted some of its loans into equity, at a substantial premium to the market price. Those share certificates proved to be worthless. It would have been more rational to accept the amounts due in cash, with a haircut.