How lenders will navigate through a difficult resolution plan

Last week, when the state bank in India, chairman Rajnish Kumar, emerged from a meeting with Indian government officials on the Jet Airways (India) Ltd. resolution plan, he made a safe note.

"We believe it is in everyone's interest that Jet Airways continues to fly," Kumar told reporters, while ensuring that the bankruptcy process remains the last option. "We will do our utmost to keep Jet Airways flying."

Behind the safe exterior, Kumar certainly knows that gathering a resolution plan for Jet Airways is an increasingly complex task.

A week ago, the dissolution plan, which involved Jet Airways partner Etihad Airways PJSC, was still on the discussion table. Since then, Etihad has signaled that it would rather leave the partnership than to increase the investment in Jet. Without a resolution plan and no temporary funding, at least 47 of Jet aircraft have become the basis for non-payment of fees. Meanwhile, working behind the scenes, a government is eager to avoid the collapse of an airline employing more than 20,000 people.

As it stands, it says that the state-owned banks will end up holding the bag. Jet Airways has a debt worth almost Rs 1[ads1]0,000 crore. SBI and Punjab National Bank have the highest airline exposure worth nearly Rs 2,000 crore each.

What will lenders do?

A meeting held by lenders on Friday to discuss the next steps was unimaginable. The talks will probably continue at a meeting on Monday.

One of the immediate decisions the banks are facing is whether they can find a buyer for Etihad's 24 percent stake. If not, should lenders buy Jet's partner investor?

While he informed the SBI of his decision not to participate in the Jet Airways restructuring plan last week, Etihad had offered to sell its equity at a price of Rs 150 per share. With no new buyers on the horizon, the consortium of lenders is mulling the purchase of Etihad Airways' stake, a person close to the development said, speaking on condition of anonymity. This 24 percent stake will be over the 11.4 crore shares that Jet Airways intends to allocate to the lender consortium as part of its equity conversion debt.

Naresh Goyal, chair and promoter of Jet Airways, has already agreed to step down from his position even though he could end up retaining part of his stake in the company.

Together, this will put the lending consortium in control of Jet Airways.

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