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SpiceJet in talks to raise Rs 400-crore bridge loan

Embattled low-cost carrier SpiceJet is in talks with both domestic and overseas financial institutions to raise...

New Delhi | Published: December 30, 2014 11:40:40 am

Embattled low-cost carrier SpiceJet is in talks with both domestic and overseas financial institutions to raise a bridge loan of about Rs 400 crore.

The funds will help it tide over the financial crunch it faces until expected foreign investments from a consortium led by founder-promoter Ajay Singh and JPMorgan come in by February-March next year.

Sources close to the development told FE that the loan, which would help ensure continuity of daily operations for up to three months, would be secured by both the current promoter, Sun Group’s Kalanithi Maran, and the airline itself. Currently, SpiceJet needs about R8-9 crore for its reduced daily schedule of 230 flights, of which about  R5 crore is paid every day to oil marketing companies (OMCs) like Bharat Petroleum, IndianOil, Shell and Reliance.

“The foreign investment is delayed because of various reasons like Christmas holidays and is now only expected to come in six to eight weeks. In the interim, SpiceJet is exploring bridge funding through domestic institutions and external commercial borrowings that will help it cover two to three months of running costs,” a source said, requesting anonymity.

Out of total liabilities of about R1,200 crore, the airline currently has a bank exposure of R300 crore with lenders like Allahabad Bank, City Union Bank and Yes Bank.

Other dues include another R300 crore to lessors, about R280 crore to state-owned and private airports, and the rest for vendors like MRO (maintenance, repair and overhaul) services and tax authorities.

SpiceJet, which had to cancel the bulk of its flights between December 16 and December 18 because it was denied fuel supply, has since cleared OMC dues of about R14 crore from funding raised by the airline and current promoters.

graph-spicejet1However, to reduce costs, the airline is only operating 20 Boeing B737 aircraft (besides 15 Bombardier Q400s), down from 35 in July this year when it had operated about 340 flights daily.

“The small amount of bridge funding already received to cover things like OMC dues have come from the current promoter and through vendor financing,” a source in the know said.

Last week, the carrier also paid the November salary dues to pilots and senior management, though it later asked 43 pilots who had already resigned to leave by December 31. This is ahead of the six-month normal notice period since the pilots would have otherwise left only in March 2015. This move, which cost the pilots three months’ pay, is estimated to have helped the airline save about Rs 7 crore, as reported by FE on December 27.

“As we currently have a surplus of pilots after fleet reductions, we are looking for ways to adjust staffing headcount down accordingly.  We are looking into ways to do this in a fair and reasonable manner, keeping in mind related regulations and balancing the interests of all stakeholders.

We have also waived notice period requirements for several pilots who requested to leave early. No pilot who has not resigned is impacted by this, the issue at hand relates to resigned pilots only,” SpiceJet said in a statement on Monday.

The airline’s white knight Ajay Singh, who is likely to replace Kalanithi Maran as a majority shareholder, is reported to have submitted a broad revival plan to the civil aviation ministry where investments of about $200 million have been earmarked in equity and working capital. Singh is also looking to get back the B737 aircraft recently returned by the management to lessors, a move that will restore the network and frequency to the previous status of a larger player.

SpiceJet, which posted a record loss of Rs 1,003 crore in FY14, went into a tailspin earlier this month when aviation regulator Directorate General of Civil Aviation limited its bookings to only 30 days on concerns about its poor financial health. However, this cap was lifted soon after by the government, which allowed it to take bookings till March 31. The civil aviation ministry also asked Airports Authority of India to offer the airline credit till December 31.

The airline’s accumulated losses stood at Rs 2,958 crore at the end of Q2FY15 — it currently has a negative net worth of Rs 1,459 crore, leading its auditors SR Batliboi to cast doubts on its ability to continue as a going concern. SpiceJet’s domestic passenger market share in November fell to 14.9%, the lowest for the year so far.

The SpiceJet scrip on the BSE closed 2.86% down at Rs 18.70 on Monday.

By: Roudra Bhattacharya | The Financial Express

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