Jet’s chairman finally agrees to step down, paving way for bank-led bailout

• Naresh Goyal, the chairman of Jet Airways, has finally agreed to relinquish his stewardship of the struggling airline.
  
• The move follows a meeting of Jet’s creditors and partner Etihad on February 28th.
  
• The reduction of Goyal’s stake was a key component to a $900 million resolution plan by the airline’s consortium of creditors, led by State Bank of India.

Naresh Goyal, the chairman of Jet Airways, has finally agreed to relinquish his stewardship of the struggling airline. The move follows a meeting of Jet’s creditors and partner Etihad on February 28th.

The reduction of Goyal’s stake was a key component in a $900 million resolution plan by the airline’s consortium of creditors, led by State Bank of India. The bailout will see the banks convert their debt into equity. As a result, Goyal will lose his majority shareholding, which will make it easier for partner Etihad to seize the reins.

Sources told the Economic Times that Goyal’s stake would fall to 20% from 51%. He will also have to give up his board seat in name. The seat will stay in the Goyal family - going to his son Nivaan Goyal.

The resolution plan also involves the raising of ₹8.5 billion worth of capital, a quarter of which will come from Goyal and Etihad - which will likely see its 24% stake in the airline rise.

The next step will be the issue of fresh shares. As per the plan, Jet’s creditors will become the largest shareholders in the company.

Goyal’s resignation has been a long time coming.

However, the final piece in the puzzle is Etihad. The banks want Etihad to take operational control of the airline, but the UAE-based aviation group has so far been reluctant. It rejected a proposal to put ₹7.5 billion of bridge funding in the airline at Thursday’s meeting - until a final resolution plan was in place.

Etihad has been extremely rigid about its participation in the bailout, having dealt with the fallout of two other partner insolvencies in the recent past.

Etihad wants the right of refusal in the event that Jet’s lenders sell their shares and exit the airline in the future. It also wants to be granted a reprieve from making an open offer for an additional 20% stake once it’s shareholding crosses 25% - a SEBI regulation.



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