Jet Airways’ Sale Process Begins, Interested Bidders Prepare For Due Diligence
At least six entities may show interest for Jet Airways Ltd. as part of the bidding process initiated by lenders this week, two people with direct knowledge of the matter told BloombergQuint.
Private equity players like KKR, Blackstone and TPG Capital, as well as strategic players like Lufthansa Airlines, Singapore Airlines and Swiss International Airlines have all reached out to consultants to conduct due diligence on the beleaguered Indian air carrier, the people said on the condition of anonymity as the talks are confidential.
BloombergQuint had previously reported that State Bank of India had reached out to TPG Capital and Tata Group for a potential sale of Jet Airways. Tata Group owns Vistara, which is a joint venture with Singapore Airlines.
To be sure, a due diligence is only the early stage of a bidding process. Once these bidders have studied Jet Airways’ books, they may very well choose to not participate at the final stage.
Meanwhile, SBI, which is the lead lender, invited expressions of interest from bidders who might be interested in taking over the airline and provide it with a new lease of life. The process of inviting bids will be conducted between April 8 and 10, the bank said in its invitation. The bank’s investment banking arm, SBI Capital Markets Ltd., is conducting the sale process for the lending consortium.
A bid document would be issued to all qualified bidders who complete the expression of interest process successfully. They would also be given a chance to conduct due diligence on Jet Airways. Qualified bidders are expected to submit their final bids by April 30, according to SBI and SBI Capital. Depending on a final bid submitted after this, the lending consortium will shortlist a successful bidder.
KKR, Lufthansa Airlines and Swiss Airlines didn't respond to queries mailed on Monday. A spokesperson for Singapore Airlines was unavailable for comment. Blackstone and TPG Capital declined to comment.
According to the invitation circulated by SBI and SBI Capital, the successful bidder will control a minimum of 31.2 percent and a maximum of 75 percent stake in Jet Airways, thereby taking control of the airline. BloombergQuint has reviewed a copy of the invitation.
To be eligible to submit an expression of interest, a financial investor must have assets under management of at least Rs 2,000 crore, in the financial year ended March 2019. Similarly, the investor must possess at least Rs 1,000 crore worth funds available for investment. A strategic investor must have a net worth of at least Rs 1,000 crore, and must have at least three years of experience in the commercial aviation business, according to the invitation.
If the investor is a consortium, then such a consortium can have up to three investors, in which each investor will not be holding less than 15 percent stake.
Bidders must not have been barred by the central government, state governments, Ministry of Civil Aviation and the Directorate General of Civil Aviation directly or through any entity owned by them. A bidder or any member of the consortium shouldn't have failed to perform on any contract in the last three years.
The lending consortium conducting the sale process, comprises nine domestic lenders, including SBI, Punjab National Bank Ltd., ICICI Bank Ltd., IDBI Bank Ltd., Syndicate Bank Ltd., Bank of India Ltd., Yes Bank Ltd., Canara Bank Ltd. and Indian Overseas Bank Ltd.
Jet Airways is struggling to meet payments as it is dealing with a severe liquidity crisis. It has a debt of slightly over Rs 10,000 crore, where SBI and Punjab National Bank have exposures worth Rs 2,000 crore each. It hasn't paid its lessors, leading to a number of planes being grounded. On last count, the airline had around 28 planes in its fleet. The airline’s employees, too, haven't been paid fully, leading to the pilot’s union threatening to go on strike. Last week, Indian Oil Corporation had briefly stopped fuel supply to Jet Airways, however, this was rectified soon.
As part of the bank-led resolution plan approved by Jet Airways’ board on March 25, the airline’s founder Naresh Goyal and his wife Anita Goyal have both stepped down from the board. Goyal has also stepped down from his position as the chairman of the airline.
Lenders had also agreed to extend debt support Rs 1,500 crore to Jet Airways, however, the funds are yet to come in. BloombergQuint had previously reported that lenders have sought a pledge of equity stake by Goyal and international partner Etihad Airways to proceed with extending funds. The stake so pledged will be held in a trust and will be marked to market on a regular basis.
In a letter to employees and customers last week, Goyal said that he had given away all his rights and interests in the airline to bankers as part of the resolution plan. Goyal owns 51 percent equity stake in the airline. Lenders are also yet to take control of majority equity in the airline by converting a portion of Jet Airways’ debt to equity.
After the Supreme Court’s order earlier this month quashing Reserve Bank of India’s debt restructuring scheme, banks are awaiting clarity from the regulator and the government on whether they can continue to take over the equity, the people cited earlier said.