FE: Hope for Jet Airways: Synergy group looks to invest up to Rs 3,000 cr in airline

30 August 2019: Synergy Group, a South American entity, which holds a significant stake in Columbian Avianca Airlines, is willing to invest up to Rs 3,000 crore in the grounded Jet Airways. The investment is conditional on the lenders of the airline taking a large debt haircut, Antonio Guizzetti, one of the advisors to Synergy Aerospace said.

German Efromovich, the owner of the Synergy Group, will meet the State Bank of India within the next two weeks to present a business plan. “Jet Airways is a good company, but it is grounded, which is very difficult to rehabilitate. Our desire is to negotiate with the banks for conversion of debt to equity,” Guizzetti said.

Financial creditors have claims worth over Rs 8,200 crore due with Jet Airways. Efromovich had in 2004 bought a bankrupt Avianca. The airline has since grown to become Latin America’s second largest. The Synergy Group is looking for an Indian co-investor, and it has engaged legal experts to see whether the entity can own more than 49% stake in Jet Airways.

“How much stake Synergy Group can pick up is under discussion with our lawyer, because the 49% limitation in foreign ownership is applicable for an airline operator. But the investment into Jet Airways will be done by Synergy Aerospace as a foreign entity,” Guizzetti said.

As per the Indian foreign direct investment (FDI) regulations, a foreign airline can directly invest up to 49% in a scheduled Indian carrier. “However, the rule applies only to those entities which directly own an airline. If the foreign entity is an investment arm, private equity, fund, bank, or an industry conglomerate, FDI can go up to 74%, which is the maximum permissible investment that can be held by a foreign investor provided it is explicitly not an airline. If Synergy group invests in Jet Airways, they would have to disclose where the money they invest is coming from,” Mark D Martin, CEO, Martin Consulting, said

Lenders are currently evaluating the group’s credentials. “These are very early days. It is hard to tell whether lenders will entertain Synergy Group’s proposal. The owner had some solvency issues in the recent past. Lenders will meet Efromovich in person and see how to take things forward,” a person involved in the proceedings said.

Earlier this year, Efromovich was reportedly removed from the board of Avianca Holdings for a loan breach. The Bolivia-born entrepreneur offered up to his 51.5% stake in Avianca as collateral on a $456-million loan from United Continental Holdings, the parent company of American carrier United Airlines. He eventually defaulted on the loan, putting Avianca’s future at risk.

Efromovich has since put in an offer for Italian carrier Alitalia, which was rejected. He has been looking to invest in India, either in Air India or Jet Airways. If the deal goes through, the Synergy Group to revive Jet as an international low-cost carrier. The group plans to inject significant working capital as well as new capital investment to expand Jet’s fleet, Guizzetti said. Efromovich declined to comment in an email response to FE.

Jet Airways has been grounded since April 17 after lenders refused to extend emergency funding to the airline to continue with its operations. The slots assigned to Jet have since been reallocated to other airlines. On June 20, the National Company Law Tribunal admitted the airline for insolvency proceedings. According to the company’s website, creditors have filed claims worth over Rs 30,000 crore, of which claims of over Rs 12,000 crore have been admitted so far.

The Financial Express reported