South America’s Synergy may want Jet lenders to take 60-80 per cent haircut

Forum Gandhi Mumbai | Updated on August 30, 2019

Other demands may include halving of workforce, conversion of debt to equity

South American conglomerate Synergy Group may ask for a 60-80 per cent haircut from the lenders of Jet Airways as a pre-condition to pick up an equity stake in the stressed airline. The company may also ask the lenders to convert 10-20 per cent of their total debt into equity.

Further, there could be a demand for downsizing the workforce from the current 14,000 to 7,000 employees to revive the airline.

Speaking to BusinessLine, Antonio Guizzetti, President of G&A Consultancy, said Synergy Group may sign a a non-disclosure agreement with the lenders as early as this week as a first step. This will give the investor access to the Jet data room. Guizzetti is advising Synergy Aerospace on the Jet transaction.

Synergy had submitted an expression of interest (EoI) last week to buy Jet. It owns a majority stake in Avianca Airlines, the second largest airline in South America.

G&A has been driving the talks with Jet’s resolution professional (RP), Ashish Chhawchharia, on behalf of Synergy Group’s founder German Efromovich.

To meet lenders, officials

According to Guizzetti, Efromovich will meet Jet lenders and Civil Aviation Ministry officials during a visit scheduled for September 10-15.

“Earlier, Efromovich was sceptical because there are too many issues with the airline. It has a huge debt and it has lost several slots. He now sees some potential in reviving the airline because Jet Airways has a brand image, it has the best slots, and it has the best services,” Guizzetti told BusinessLine.

Jet has debt of ₹8,500 crore, with SBI being the lead lender. On June 20, SBI dragged the airline to the insolvency court over unpaid dues. Besides this, the airline owes monies to its vendors and employees. The claims submitted to the RP total around ₹30,000 crore.

According to Guizzetti, Synergy is looking at a heavy haircut from the lenders. “We are looking at a 60-80 per cent haircut from the banks. If they do not discount the debt, there is no conversation or deal,” he said.

Legal advice

Synergy is eyeing an at least 49 per cent stake in the airline. However, it is seeking legal advice on whether the 49 per cent limit on foreign ownership can be skipped in the case of Synergy Aerospace since it is not an operator, but a holding company.

“We will consider a financial investor and take a majority stake of 60-70 per cent. We will look at a partnership with a prestigious Indian group,” said Guizzetti. This comes amid media reports that Vedanta Chairman Anil Agarwal could take a minority stake in Jet through his family trust.

Published on August 30, 2019

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