Jet Airways defaults on $140-mn ECB loan
29 March 2019
The financial crisis at Jet Airways deepened with the beleaguered airline defaulting on a $140 million loan due to HSBC Bank. The first repayment tranche of $31 million was due on 11 March and the second installment of $109 million was due on 28 March.
The airline informed stock exchanges that the payment of external commercial borrowings (ECB) due on Thursday was delayed because of temporary liquidity constraints and that it was engaged with the bank regarding the same.
The loan, signed between Jet and HSBC in January 2014, had a five-year term and was due for repayment at the end of the fifth year. The loan was guaranteed by Eithad Airways, which now owns 12 per cent in Jet
The default takes place after the lenders of Jet Airways committed to provide Rs1,500 crore in emergency loan to tide over financial crisis. There was also a change of guard with Naresh Goyal stepping aside as chairman and MD of the airline.
Jet, in a letter to HSBC on March 11, had said it is going through a severe liquidity crunch and is working on a bank-led resolution plan for its revival.
The plan, it has told the bank, is in the final stages of seeking regulatory and corporate approvals and pending these approvals, the company is unable to repay tranche of $31 million to the bank.
Jet Airways, which grounded four more planes, is hoping to get these off ground once its finances stabilise.
With lenders taking control of Jet Airways, Etihad is undecided on the interim funding plan.
The Gulf carrier is eyeing 49 per cent stake in Jet Air, which is the maximum permitted under FDI rules in India.
Etihad Airways is reported to be in talks with a partner to jointly bid for Jet Airways, which has been put up for sale by banks.
Government sources said Etihad has not given up on Jet in which it held 24 per cent stake. After banks acquired 50.1 per cent stake in Jet, shareholding of all existing investors fell by half with Etihad left holding 12 per cent stake.
Etihad is reported to be looking for the right partner as it can hold only 49 per cent stake. The airline is said to be in talks with an investor for jointly bidding for Jet Airways.