Jet Airways crisis: Synergy Group consents to pick 51% stake in grounded airline if lenders take a deep haircut
BusinessToday.In September 3, 2019
Synergy Group Corp., which is one of the likely investors for Jet Airways, is inclined to take up a majority stake in the grounded airline as long as the lenders consent to take a deep haircut and convert their debt to equity.
"We are consulting lawyers and exploring (whether) Synergy Aerospace as a financial investor can take a majority stake in Jet Airways," Antonio Guizzetti, president of Washington-based Guizzetti & Associates, legal adviser to Synergy Group on the Jet Airways acquisition said. He added that the South American company is willing to pick up a 51% stake in the airline.
According to a report in Livemint, Guizzetti further said that in India "the group will look to partner banks and maybe an Indian industrial group" but the Synergy Group has not yet had any talks with potential partners in India.
Synergy Group Corp which owns a majority stake in Colombian carrier Avianca Holdings, the second-largest airline in Latin America, operates several airlines in South America. Avianca Holdings also has a codeshare partnership with Air India.
However, as per the government norms, a foreign carrier can neither hold over 49% in a domestic airline nor effectively control it. Even though financial investors can own more the 49% stake, the effective control of an airline stays with the Indian investors. But, this might change if the government takes a decision to alleviate restrictions on foreign direct investment (FDI) as was proposed in the budget.
German Efromovich, the Group's Bolivian-born founder, will visit India on September 15 to discuss investment options with Jet Airways' lenders, the report added.
Meanwhile, the grounded airline's liabilities continue to mount. As per earlier claims, Jet Airways had liabilities of over Rs 26,000 crore, which has now reportedly shot up to Rs 30,558 crore. Of the total claims, the airline's resolution professional (RP) Ashish Chhawchharia has admitted Rs 12,555 crore worth of claims.
Given that Efromovich himself is mired in financial troubles - his wholly-owned carrier Avianca Brasil was grounded by Brazil's civil aviation regulator in May following the company's filing for bankruptcy late last year and around the same time he was ousted from the chairman's post of Avianca - doubts are raised about his interest in Jet Airways. Efromovich is now waging a legal battle to retain control of his majority stake in Avianca after defaulting on a $456 million loan from US airline United Airlines, which the businessman had secured with his Avianca shares.
Meanwhile, Jet Airways that is undergoing insolvency proceedings has failed to attract any new bidders during the extended period for submission of initial bids. This is the third time lenders extended the deadline after August 3 and 10. The third deadline for submission of Expression of Interest (EoI) ended on August 31.
With no new bidders coming forth, the grounded airline has only three entities that had put in initial bids earlier, which are Russian Fund Treasury RA Partners, Panama-based investment firm Avantulo Group and South American conglomerate Synergy Group Corp.
A source told news told news agency PTI, "No new EoIs have been received," while another said, "Now, the deadline is unlikely to be extended further. The plan will be to go ahead with the three entities that had submitted their EoIs."
Jet Airways' Committee of Creditors (CoC) extended the deadline for submission of EoIs on August 26.
In the second round of submission of EoIs that ended on August 10, energy baron Anil Agarwal's family trust-backed Volcan Investments, Russian Fund Treasury RA Partners and Avantulo Group had shown interest. However, Volcan backed out a day after publicly announcing its interest in the airline. After the August 10 deadline, Synergy Group Corp reportedly evinced interest in the airline.
Etihad Airways, which owns 24 per cent stake in Jet Airways, did not submit any bid.
(Edited by: Manali)