Naresh Goyal, chairman of Jet Airways India Ltd. (Photographer: Vivek Prakash/Bloomberg)

Founder Naresh Goyal Agrees To Step Down As Jet Airways Chairman

Naresh Goyal agreed to step down as chairman of Jet Airways Ltd. to allow the board to move ahead with a debt recast plan for rescuing the carrier he founded, according to two people with direct knowledge of the development.

At the meeting which lasted past midnight, lenders discussed the resolution plan with representatives from Jet Airways and its partner Etihad Airways, the people said seeking anonymity as the talks are private. The plan envisages converting part of debt to long-term equity-like instruments and a rescheduling of loans, help the beleaguered airline service its debt. It also involves allotting 11.4 crore to the lenders, making them the largest shareholder.

During the meeting Goyal, who owns 51 percent of the airline, offered to step down to save the carrier, a development first reported by Reuters on Thursday.

The resolution plan is crucial for Jet Airways to survive as it has been struggling to service over Rs 10,000-crore debt, forcing the airline to not pay lenders, operational creditors and employees. It informed exchanges today that six aircraft had been grounded because of not paying lessors, in addition to 13 earlier this month.

The lenders informed representatives from Jet Airways and Etihad, the 24 percent owner, that they would need to infuse equity to maintain their shareholding and stabilise its operations, the first person quoted earlier said.

The terms and conditions put forth by Etihad for infusing equity were too stringent for the lenders to approve, the person said. For now, the discussion around the debt recast is inconclusive and requires further negotiations, both the people cited earlier said.

The plan at this stage also accounts for an eventual rights issue for existing shareholders and may also involve new investors. Earlier, news reports said that the National Infrastructure Investment Fund may invest in Jet Airways as part of the resolution plan. BloombergQuint couldn’t independently verify it.

Also read: Jet Airways’ Shareholders Approve Debt Recast Plan

Insolvency Fear

To be sure, the plan is still at a provisional stage and would require at least 66 percent of the lenders to approve it before the consortium, led by State Bank of India, can move forward.

The lenders have been trying to come up with a resolution plan for Jet Airways after it defaulted on debt repayment on Dec. 31. The Reserve Bank of India's latest restructuring guidelines make it compulsory for banks to resolve the stress in a company within 180 days of the first default, after which insolvency proceedings would begin. The lenders are trying to avoid this as they fear that they will not recover much through that route.

Meanwhile, Jet Airways pilots who had threatened to start a non-cooperation protest starting March 1 for not getting paid have agreed to cooperate after the tension on the India-Pakistan border, Moneycontrol reported.