Etihad flies in to rescue Jet Airways, will help raise loans
Etihad Airways offers to guarantee loans worth $150 million to keep Jet Airways operational
Mumbai: In an apparent rescue act, Etihad Airways PJSC of Abu Dhabi has offered to guarantee loans worth $150 million that Jet Airways (India) Ltd needs to keep the airline operational, two people directly aware of discussions between the two airlines said. The development follows several rounds of talks between the two sides which also included a potential equity infusion by Etihad Airways and adding a third Indian partner, said the two people cited above. Both requested anonymity as the talks are private.
“As an immediate measure, Etihad has agreed to stand as a guarantor for any fresh loans to be raised by Jet Airways and has engaged at least two foreign banks, one of them headquartered in UK, to syndicate the new loans,” said the first person.
“Both sides feel that an equity infusion by Etihad Airways, which already owns 24% in Jet Airways, will take time and it may not be enough for Jet Airways to tide over its current financial troubles, given Jet’s depressed valuations,” the person said.
“In the given situation, both sides which have been having discussions for a while now, feel that this is the best possible solution for now. According to industry estimates, Jet Airways will need close to $500 million between now and April next year to meet repayment obligations and manage operating expenses.”
A spokesperson for Etihad Airways said it does not comment on rumour or speculation.
An email sent to Jet Airways remained unanswered until publishing of this story.
Jet Airways is already behind schedule on payment of its aircraft lease rentals and has not paid staff salaries in full for the past few months.
Since January, shares of Jet Airways have plunged more than 66% to ₹278.20.
In October, rating agency ICRA Ltd downgraded Jet Airways’s credit rating to ‘B’, which is assigned to loan facilities with a high risk of default.
The worsening credit profile has made it virtually impossible for the company to raise fresh loans.
“Etihad’s offer comes with a rider,” said the second person cited above. “It also wants Jet Airways’s domestic lenders to simultaneously increase limits for Jet Airways’s loans. Some of Jet Airways’s biggest lenders, mainly public sector banks, have been sounded off by Etihad and Jet Airways,” the person said adding that “the domestic lenders are yet to come back with a firm commitment”.
Mint reported in August that Jet Airways has written to a consortium of overseas lenders, seeking a waiver of a loan covenant on its existing debt facility of about $185 million in a bid to avoid a default on its loans.
Mint also reported on 5 December that Jet Airways has told its pilots at a meeting last week that it will bring on board a new investor in two-three months.
Jet Airways officials, led by chief executive Vinay Dube, gave the assurance at a 26 November meeting with the pilots’ union, National Aviator’s Guild. The meeting was held to assuage pilots’ concerns about various issues including salary delays, the Mint report said.