Jet faces turbulence: Airline may ask creditors to take a haircut

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Updated: January 4, 2019 7:34:33 AM

It has large repayments of Rs 1,700 crore due over December 2018 to March 2019, Rs 2,445.5 crore in FY20 and Rs 2,167.9 crore in FY21.

The loss-making carrier is in discussions with the State Bank of India for raising `1,500 crore short-term loan to meet its working capital requirements and payment obligations.

Cash-strapped Jet Airways, which has defaulted on loan repayment to banks due on December 31, has sought a meeting with all its vendors and creditors, including lessors, MRO partners among others, in the coming week in the Capital, to impress upon them to take a haircut as it is unable to meet its payment obligations.

Sources in the know of the development told FE that promoter-chairman Naresh Goyal has himself sought such a meeting to try and convince vendors and creditors to stand by the airline as he negotiates with banks and strategic partners for funds.
When contacted, a Jet Airways spokesperson said, “In line with its policy, Jet Airways does not comment on speculation”.
The loss-making carrier is in discussions with the State Bank of India for raising `1,500 crore short-term loan to meet its working capital requirements and payment obligations.

Jet’s JV partner Etihad, which holds 24% stake, is likely to provide guarantee for the loan apart from offering SBI the lien on its flying miles programme, JetPrivilege. SBI is the lead lender in over `8,000 crore of Jet’s debt.

The talks for loan are going on at a time EY is carrying out a forensic audit on Jet on the orders of SBI for alleged irregularities. Credit rating agency Icra on Wednesday further downgraded Jet’s long-term ratings to ‘D’ after it defaulted on a loan repayment. This is the third such action by Icra since October.

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In a late night filing to the bourses, Jet had said, “Payment of interest and principal instalment due to the consortium of Indian banks (led by SBI) on December 31, 2018, has been delayed due to temporary cashflow mismatch ….”

Jet has already been delaying its employee salary payments and lease rental payments to the aircraft lessors. The company had a gross debt of Rs 8,411 crore at the end of September quarter. It has large repayments of Rs 1,700 crore due over December 2018 to March 2019, Rs 2,445.5 crore in FY20 and Rs 2,167.9 crore in FY21.

The airline has initiated talks with Tata group to buy stake, and reportedly held discussions with partner Etihad Airways to bring in fresh capital to tide over the financial crisis, but nothing concrete has materialised so far. Sources said that talks are stuck as potential buyers are insisting on Goyal’s exit from the airline which he’s not amenable to so far.

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