Cash strapped Jet Airways has vowed Fixed deposits worth Rs 1, 500 crore with different banks to borrow Rs 225 crore from the State Bank of India, Mint reported. The airline can avail funds from SBI with these FD as security. It didn’t redeem the FD because borrowing from them would assist the airline to earn greater interest than what it’s to pay SBI, a source told the paper. These funds will be used for its core business operations to avoid further grounding of its fleet.
As much As 23 airplanes from Jet Airways fleet have been grounded since Feb 8 because of nonpayment of rent. The carrier has also been struggling to pay the wages of its pilots and workers. It saw losses of over Rs 1, 000 crore in each one of the last 3 quarters, a trend that’s expected to continue at the March quarter. Banks were reluctant to sanction a term loan to Jet Airways without gaining exclusive rights to the airline’s interest yielding cash deposits, enjoying assets or equity share pledges, the source mentioned above stated, adding: Ultimately, SBI agreed to disburse a term loan after Jet Airways permitted the lender to pledge all of its FDs with exclusive rights.
The airline could raise additional capital from banks and stakeholders as part of a common solution plan. The report stated that banks look for secured assets that earn returns in cases where they’re unsure whether the borrower has other avenues to pay back the loan. Borrowing against FDs is generally seen as the last choice for companies facing liquidity difficulties, and Jet Airways net worth and credit rating cuts have left it without any other choice. The most recent loan documents imply it’s given the first and exclusive rights to all of Its FDs to SBI for your loan. This term loan has been extended by SBI at January at 6.25 percent.
Jet Airways will need to refund close to Rs 250 crore from April 29. As of December 31, 2018, Jet’s total debt was pegged at Rs 9, 610.16 croresRaRatinggency ICRA downgraded Jet Airways credit scores in Sept, October, December 2018 and January. The loan arrangement gives SBI, the largest lender to Jet Airways, the right to take advantages of the FDs and their accrued interests rates if Jet doesn’t repay the loan. On Feb 23, the board of directors of Jet Airways accepted the conversion of its debt into equity, and consequently, founder and president Naresh Goyal’s stake in the carrier dropped from 51 percent to below 20 percent. On March 1, Goyal agreed to step down from the board and gave up his directorial powers.