BQ Exclusive: SBI Reaches Out To Tata Group, TPG Capital To Invest In Jet Airways
Jet Airways Saga: SBI begins preliminary talks with Tata Group and TPG Capital
Lenders to Jet Airways (India) Ltd., led by State Bank of India, have reached out to two potential investors, just days after they became majority equity holders in the airline.
According to two people familiar with the matter, lenders have reached out to U.S.-based private equity investor TPG Capital and the Tata Group for a potential investment in Jet Airways. The two people spoke on condition of anonymity as the talks are confidential.
According to the two people quoted above, lenders reached out to the two bidders since they had previously showed interest in Jet Airways but talks had fallen through. Even now, the conversations are at preliminary stages and no formal bid has been prepared by either parties, the people quoted above said.
According to the first person quoted above, TPG Capital would likely come in with a strategic partner if they choose to invest. The Tata Group already has a tie up with Singapore Airlines since 2013, through which it manages Vistara Airlines. As such, any investment in Jet Airways would have to be in keeping with the group’s broader strategy for the aviation sector.
A spokesperson for the Tata Group said the group does not comment on market speculation. A TPG Capital spokesperson declined to comment. Jet Airways and SBI are yet to respond to queries mailed on Thursday.
The talks come within days of the Jet Airways board approving a bank-led resolution plan. As part of this plan, lenders ended up with more than 50 percent stake in the air carrier. It’s founder chairman Naresh Goyal exited the board but retained 25 percent in the airline. Banks also sanctioned an additional Rs 1500 crore in credit.
The lenders had previously put together a plan where Jet Airways’ current international partner Etihad Airways PJSC would put in more equity to maintain its shareholding. However, Etihad Airlines backed out of the deal citing unfavourable terms. Instead, the Abu Dhabi-based air carrier offered to sell its stake to the lenders at Rs 150 per share. Due to Etihad’s reluctance to participate in the deal, lenders were forced to take control of the airline.
Speaking to BloombergQuint earlier this week, SBI chairman Rajnish Kumar said that lenders hope to exit the investment within two months. He left the door open for all possible investors, including Etihad Airways and Naresh Goyal.
According to the first person quoted above, any new investor coming in would need to bring in at least Rs 4,500-5,000 crore in the form of fresh capital to repay lenders as well as stabilise operations at Jet Airways. The company has a capital shortfall of about Rs 3,500 crore.
The interim funding provided by banks will be enough for about two months, Kumar had told BloombergQuint. In a subsequent meeting, lenders decided to prioritise payments to lessors and employees from the freshly approved credit facility.
Jet Airways informed stock exchanges on January 1 that it had defaulted on loan repayments to lenders. It has over Rs 10,000 crore in debt, with SBI and Punjab National Bank having the largest exposure of around Rs 2,000 crore each.
As per the RBI’s rules, banks need to come up with a resolution plan for a defaulting firm within 180 days of first default or refer the firm for insolvency. In Jet Airways’ case, banks have not yet restructured the existing debt. As such, they either need to sell the 50 percent stake they are holding in the airline or agree to debt restructuring within the 180-period, explained a person familiar with the regulations. Should they fail to do both, Jet Airways will need to be referred for insolvency, this person said while speaking on condition of anonymity.