Shareholders of the beleaguered Jet Airways have approved a proposal to convert a part of company's loans into shares with an overwhelming majority.
The development assumes significance as the approval was required to go ahead with the Bank-led Provisional Resolution Plan (BLPRP). As part of this, public sector lenders will become the largest equity owners of the airline, virtually making it a nationalised carrier.
According to the airline, the proposal, an attempt to relieve the financial strain on the passenger carrier, was put forth to the shareholders at the Extraordinary General Meeting held here on Thursday. Results of the vote was announced on late Friday night.
The special resolution to allow conversion of loans into "shares or convertible instruments or other securities" was passed with over 97 percent votes. It comes after Jet Airways Board approved the BLPRP on February 14.
"The BLPRP currently estimates a funding gap of Rs 8,500 crore (including proposed repayment of aircraft debt of Rs 1,700 crore) to be met by appropriate mix of equity infusion, debt restructuring, sale or sale and leaseback or refinancing of aircraft, among other things," the company said in a regulatory filing to the BSE on February 14.
As part of a provisional resolution plan, the airline's Board has agreed to allot 11.4 crore shares at an aggregate value of Re 1 to the lenders' consortium led by the State Bank of India, according to the airline.
Through the conversion, the Board of Jet Airways Ltd has approved an action plan by its lenders to resolve a nearly Rs 8,500 crore ($1.19 billion) funding gap, which will make them the largest shareholders of India's biggest full-service carrier.
Recently, Jet Airways reported Rs 587.7 crore as standalone net loss for the third quarter ended December 31, 2018. It had reported a net profit of Rs 165.25 crore during the year-ago period.
The private carrier on January 1 defaulted in paying interest and instalments on loan repayments due to banks, following which rating agency ICRA downgraded both short and long-term credit facilities of the airline.