Etihad Bows Out Of Jet Airways Resolution Plan, Offers To Sell Stake

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Etihad Airways PJSC has offered to sell its 24 percent stake in Jet Airways Ltd., allowing the Indian carrier’s lenders to decide on their future course of action, two people in the know confirmed.

After a meeting between Etihad Ariways’ Chief Executive Officer Tony Douglas and State Bank of India Chairman Rajnish Kumar, the Abu Dhabi-based airline has stated that it will not participate in the resolution plan for Jet Airways, the people cited above said on the condition of anonymity.

In a late evening meeting between SBI and the rest of the lending consortium, bankers were made aware of Etihad Airways’ stance and its reluctance to participate in the resolution plan. Lenders are now mulling an alternative plan for resolving Jet Airways.

Etihad Airways had purchased its stake in Jet Airways in April 2013, paying around $379 million for it.

According to the first of the people cited above, Etihad Airways had raised concerns regarding a few aspects of the plan, which the lenders were unwilling to change. The issues raised by Etihad include the “right of recompense” that Indian lenders were seeking from it after the resolution plan is implemented. The right would have ensured that after Jet’s lenders took a haircut on their loan exposures, Etihad Airways would repay some part of the haircut, once its equity investment started generating returns.

Another issue was the eventual stake that Etihad would own in Jet Airways, after it infuses the equity necessary to stabilise operations. According to the two people quoted above, Etihad Airways intended to control at least 26 percent stake in Jet Airways, after it infused more equity, after the implementation of the resolution plan. Under existing guidelines of the Securities and Exchanges Bureau of India (SEBI), if an investor intends to control more than 25 percent stake in the company, an open offer is triggered, something Etihad Airways wanted to avoid.

A spokesperson for Etihad Airways told BloombergQuint, “As a minority shareholder, Etihad is working closely with Indian lenders, the company and key stakeholders to facilitate a solution for Jet Airways.”

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