The proposed resolution plan for Jet Airways would give the new owners more than 90% stake in the grounded airline with the rest going to its lenders, the resolution professional appointed by the bankruptcy court told ET.
Neither public shareholders nor Jet’s employees, except those retained by the new owners, stand to gain anything out of the deal, experts said.
The committee of creditors of Jet Airways had last week approved the revival plan of a consortium of Murari Lal Jalan, a non-resident Indian businessman based in the UAE, and Kalrock Capital, a London-based asset management firm.
The National Company Law Tribunal, which is hearing the insolvency proceedings, is yet to approve the plan that proposes to relaunch the full-service carrier with an initial investment of Rs 1,000 crore.
Jalan and Kalrock plan to split their holding in Jet in a ratio of 51-49, said resolution professional Ashish Chhawchharia of Grant Thornton.
Discussions are on with Gulf carrier Etihad Airways on a new shareholding structure for the airline’s loyalty programme subsidiary Jet Privilege, now named InterMiles, he said. Jet owns 49.9% of the company while the rest is owned by Etihad.
People aware of the development said the new owners will offer about 9% stake in the airline to lenders including SBI, Yes Bank and IDBI in lieu of their debt.
Chhawchharia said public shareholding in the airline will be completely clamped down for now. He didn’t specify whether the new owners plan to delist Jet.
Experts said public shareholders don’t have much claim in a company facing insolvency.
“If the liquidation value of the corporate debtor is zero, it is up to the investor to offer anything to public shareholders in the event the company is delisted or otherwise,” said Sumant Batra, a lawyer specialising in insolvency cases. “In an insolvency resolution, it’s completely up to the new investors how they want to structure the shareholding in the company.”
While the earlier promoters are prohibited under the Insolvency and Bankruptcy Code, even the employees of the airline have limited rights.
“Generally speaking, if the secured creditors, who stand ahead in the priority list, do not receive their full dues, it is to be expected that other operational creditors, including employees, may not be entitled to receive much unless the investor wants to retain some older employees and get into fresh negotiations with them,” said Batra, a former president of Insol International, a London-based body of lawyers and accountants specialising in insolvency and turnarounds.
Meanwhile, Jet pilots’ union National Aviators’ Guild will appeal to NCLT for a copy of the resolution plan and to be heard before the plan is approved, the union’s counsel Jane Cox said. NAG has 1,150 members, of whom 250 are still employed with the airline.
Jet stopped operating in April 2019 bereft of cash and saddled with debt. NCLT admitted an insolvency case filed against the airline by its debtors in June 2019. Before the case, its founder Naresh Goyal held 51% stake while Etihad held 24%. As of end June 2020, Goyal as promoter held 25% stake in Jet. Etihad as public shareholder held 24%, while lenders (including Punjab National Bank holding 26%), insurance companies, overseas investors and retail investors held the rest.
Jalan, a UAE businessman with interests in real estate and infrastructure, has investments in a number of companies in India. As of September end, he held 44.62% of Agio Paper Industries, a BSE-listed company. He owns stake in Medanta super speciality hospitals and is a whole time director in Patanjali India Distribution, since January 2019, according to records from the corporate affairs ministry.
A person close to the development said the investment in Jet would be that of Jalan and Kalrock’s owner Florian Fritsch only. Neither Kalrock nor any of its associates or subsidiaries have any Indian investor, big or small, the person said.
Nikos Kardassis, a veteran in Jet Airways and a close associate of its founder Naresh Goyal, was engaged in a consultative role as part of a group doing market research for Jalan-Kalrock when it was drawing up the revival plan for Jet, said multiple people in the know.
Jet’s shares have been rising since the plan was approved. In the last five days, they have risen 22%, closing at Rs 46.45 on the Bombay Stock Exchange on Wednesday.
The resolution professional has admitted claims of Rs 15,432 crore, of which Rs 7,454 crore are from financial creditors, Rs 6,658 crore from other operational creditors, and about Rs 1,500 crore from employees and their representatives.
Jet had 16,000 employees when it stopped operating. It now has 3,300 on its rolls.
People in the know have said, financial creditors may have to take up to 90% haircut on their dues.
Chhawchharia didn’t disclose details of the plan but said the new investors plan to take Jet “to its old glory”.
He said Covid-19 has been a great leveller for the aviation industry. “There is a clear space for a premium carrier with long haul flights in the market,” he said.
Chhawchharia said he has kept the civil aviation ministry apprised of the developments of the insolvency process. The new investors will now apply for the arrival and departure slots of Jet which have in the last one year been reallocated to rival airlines. He said the slots are key in its path to recovery.
Source: Economic Times