- by GI Magazine
- Sep 30, 2022
MUMBAI, Aug 8; 6:48 PM (Reuters) - Private lenders IDFC First Bank (IDFB.NS) and Yes Bank (YESB.NS) and state-owned Indian Bank (INBA.NS) have put their loans to SpiceJet Ltd in the high-risk category, the latest setback for the airline, people with knowledge of the matter said.
While the Indian budget carrier has not so far defaulted on any loans, the lenders are concerned about its cash flows and have held discussions to seek assurances from the airline as it is behind on payments to some aircraft lessors, the sources said. "There is no positive news about SpiceJet", with earnings under pressure over several years due to the pandemic, one of the sources said. The airline's outlook does not look encouraging, the source added. SpiceJet said no bank has put its account on high alert.
"Loans are being serviced as per the agreed terms. We are not aware of any bank having any 'concern', nor has there been any communication regarding the same to SpiceJet," a company spokesperson told Reuters in an email. The banks did not respond to Reuters' requests seeking comment on SpiceJet's current loan size, concerns with its financial position, or whether it had asked for more funds.
"IDFC Bank's net exposure is quite small at only 460 million rupees and that is also supported by security cover of twice the amount," said a source familiar with the bank's exposure to SpiceJet. Shares in SpiceJet fell as much as 4.8% on the news. The stock is down 30% so far this year. SpiceJet's approved fleet was halved for eight weeks this summer by regulators due to safety issues and lessors have filed formal applications to de-register four planes.
The two moves have raised concerns the airline's tight liquidity could be further strained amid high fuel prices and rising competition from new entrants like Akasa Air. SpiceJet Chairman Ajay Singh and his wife, who control 59% of the airline, as of June 30 had pledged shares representing a 26% stake for credit facilities for company use, mostly to these three lenders, according to a regulatory filing. SpiceJet last week said it had cleared all its outstanding principal dues with the Airports Authority of India, a move that would lead the airport operator to release a 500 million rupee ($6.3 million) bank guarantee.
Aircraft lessor TWC Aviation Capital however said SpiceJet remains behind in its payments on the two Boeing Co (BA.N) 737-800 planes it has placed with the airline. "SpiceJet told us that they would catch up the payment in late August once they secure a loan from a bank," TWC Director Ted Nozaki told Reuters.
"At this time, we do not intend to request de-registering these aircraft, but the situation may change if they cannot catch up the payment, or their payment is further delayed," he said. Several other lessors declined to comment.
SpiceJet did not comment on whether it is seeking more bank loans or if those planes could be de-registered. The airline said in February it was in discussions with lenders to raise additional funds. SpiceJet expanded rapidly after rival Jet Airways (JET.NS) suspended operations in 2019, taking over many aircraft formerly leased by Jet, but then struggled to make payments when the pandemic hit and demand collapsed. Auditors of its financial accounts for the December quarter cast doubt in their accompanying statement over its ability to remain a going concern without additional funding. SpiceJet has yet to file its March quarter results, citing a ransom ware attack, even as listed rival Indigo released June-quarter earnings last week.