Jet Airways investors seek massive write-down on debt

State Bank of India (SBI)-led bankers’ consortium’s efforts to revive the grounded Indian airline Jet Airways has run into a rough patch, with potential investors such as Hindujas and Etihad Airways are understood to ask the lenders to take a huge haircut on the carrier’s debt.

Senior executives of Hinduja group and Etihad Airways, during a meeting with the SBI officials last Thursday, have asked for a steep haircut from the lenders as a pre-condition for them to acquire equity stakes in Jet Airways, the Hindu Business Line reported.

The bidders are reportedly eyeing up to 75 percent reduction in debt by the banks on Jet’s debt.

London-based Adigro, which has also approached SBI with an unsolicited bid for Jet Airways, is also reportedly part of the discussion with the lenders to the carrier.

Commenting on the development, an Etihad spokesperson told Arabian Business: “Etihad continues to work directly with key stakeholders in India to help find a solution which would ensure Jet’s return as a viable and competitive Indian airline, as it has been doing consistently for the past 15 months.”

The UK-based Hinduja brothers – Sri and Gopi Hinduja – have shown interest in joining hands with Etihad to acquire stake in Jet Airways, and Hinduja group executives had reportedly held discussions with the Abu Dhabi-based airline officials last week on this.

Etihad Airways, which holds 24 percent stake in Jet Airways, was the sole bidder for the carrier in response to SBI Capital inviting bids from prospective investors.

Aviation industry sources, however, were sceptical about a revival for the grounded Jet Airways at this stage.

“One is not sure at this stage about the prospects for the revival of the airline (Jet) as we do not know how much haircut the banks can take under the ‘Sashakt’ scheme under which the creditors have proposed to offer stake in Jet Airways to new investors,” an aviation industry analyst with a Mumbai-based rating agency told Arabian Business.

Sashakt scheme is bank-led resolution mechanism for stressed assets, outside the Insolvency and Bankruptcy Code (IBC) process for stressed assets.

The outstanding liabilities of Jet Airways are estimated to be over $1.4 billion.

Industry sources said with the prospects for revival of Jet Airways being bleak for a host of reasons, any prospective investor who is willing to take the risk would bargain for a major haircut on the liabilities of the airline.

Expressing serious doubts about a recovery for Jet Airways “in its present, unviable and unenviable position”, Saj Ahmad, chief analyst with the London-based StrategicAero Research, told Arabian Business that “the vast sums of money needed to restore Jet back to flying capability will be nothing short of eye watering”.

“Who would knowingly want that risk given how immature and unprofitable the Indian aviation market is?” he added.

Saj said even if the airline is revived, “it (Jet Airways) will not be what it was – it will be a bit-part player fighting for scraps. That’s no way to run a business except into the ground”.

The interest of the Hinduja brothers came even as the top deck of the Jet management has already left the company, and the Indian aviation regulator Directorate General of Civil Aviation (DGCA) is in the process of giving away Jet’s international routes to other Indian carriers on a temporary basis.

DGCA has already allotted the domestic routes of Jet Airways to some of the Indian airlines for a 3-month period.

Meanwhile, former Jet Airways chairman Naresh Goyal and his wife Anita were deplaned from a London-bound Emirates flight on Saturday evening as it was taxiing on the Mumbai airport’s runway.

According to Mumbai Airport authorities, Goyal and his wife were prevented from leaving the country, but not detained.

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