Time is running out for debt-ridden Jet Airways. Existing investor, Etihad Airways has offered a bailout package but with conditions attached.

Etihad Group CEO Tony Douglas, in an email to State Bank of India (SBI), said his airline will invest in struggling Indian carrier Jet Airways only at Rs 150 per share.

Douglas, in his email, said the airline wants an exemption from Sebi on preferential pricing and open offer guidelines in order to invest more money in Jet Airways for its bailout. He categorically denied pledging additional shares to raise debt for capital infusion. Jet has to make large debt repayments to a consortium of Indian banks, led by SBI.

Etihad, in the letter to SBI, said debt extended to Naresh Goyal and related parties should not be converted to equity and bankers must insist on a moratorium on this debt.

Further, the airline insisted that Goyal must step down from the board with stake restricted to 22 percent from the current 51 percent.

If these conditions are agreed upon, the international carrier will immediately release the earmarked $35 million.

Jet Airways' lenders are working on a resolution plan and banking sources told CNBC-TV18 that the SBI-led consortium is broadly in agreement on a restructuring plan for Jet Airways.

CNBC-TV18 caught up with Mohit Saraf, senior partner, Luthra & Luthra; Jitendra Bhargava, former executive director, Air India and Sandeep Parekh, managing partner, Finsec Law Advisors, to discuss whether Indian regulators should consider Etihad's proposal and save another airline from going down the Kingfisher way.

Mohit Saraf said, "Typically even if you assume right now that the present case falls under the February 12 circular where the bank is restructuring it and transferring control, then also the pricing guidelines still stays. So, because of that, the rights issue looks like one of the ways to go forward where Naresh Goyal and his team does not subscribe to his right, that is one way of doing it. Then you have a provision that all unsubscribed shares are taken over by Etihad. However, that will trigger an open offer which is challenge here because the company needs cash and therefore, they will try to avoid. I would say open offer exemption is pretty easy to obtain as long as the debt is being restructured under February 12 circular."

Jitendra Bhargava said, "There are challenges galore. Naresh Goyal has put Jet Airways in a corner where there are little options left for it. You have Etihad on one side, the bankers on the other side and let us not forget the Kingfisher saga. Banks will be very cautious this time."

"Jet Airways has to raise funds. Eithad can put in money upto a certain extent and if they say Rs 150 per share is what we are going to give, we are not talking of a huge sum, they just meet the current liabilities that they have. So, I have always brought in this element of market dynamics. Indian market is price sensitive. There is little scope for full service carriers to be generating surplus, it is the low cost airlines which are really getting the right fare for their product," Bhargava said.

Sandeep Parekh said, "If it is considered as a court approval/competent authority approved restructuring then they could get away with not making an open offer. However, the ICDR pricing requirements still remain and those cannot be waived because there is kind of an exemptive authority but that is only for minor issues which need to be ironed out. So, this is a substantive exemption they are seeking and I do not think that will fly at all. Entire SEBI board unanimously also cannot override their own regulations. So, I do not see that happening. So, rights offering might be a way out and they could probably get away with getting an exemption under the open offer requirement but not the pricing."

First Published:Jan 16, 2019 9:39 PM IST