Jet Airways Lenders Are Wary of Extending New Loans
(Bloomberg) -- Jet Airways India Ltd.’s lenders are reluctant to extend additional loans to the cash-strapped airline ahead of a key report by the company’s financial auditor, according to people with direct knowledge of the matter.
India’s biggest full-service carrier, part-owned by Etihad Airways PJSC, had approached banks for emergency funding but the lenders prefer that the company raises money from a share sale before they would commit to any fresh credit, said one of the people, who asked not to be identified as the matter is confidential. Lenders are waiting for auditors’ endorsement of financial accounts after the airline delayed its earnings announcement last week, the people said.
A spokesman for Jet Airways didn’t respond to emails and calls seeking comments on its efforts to repay borrowings. In a separate statement late Monday, the airline said it’s been evaluating funding options to meet liquidity requirements “on priority” and proactively working on multiple revenue enhancement and cost-cutting measures.
Jet Airways is seeking to bolster its finances after reporting a loss in the year ended March 31. Rising jet fuel prices have eroded cash and inflated its total debt to 55.4 times earnings before interest and tax as of March. The carrier said Aug. 9 that the audit committee didn’t recommend financial results for the board’s approval, “pending closure of certain matters.”
Shares of Jet Airways fell as much as 2.3 percent on Tuesday in Mumbai. They have tumbled about two-thirds this year, headed for their biggest decline since 2011, and are trading at their lowest level since June 2015.
The National Stock Exchange of India on Monday sought clarification from the company on why the results have been delayed and told Jet Airways to disclose the fresh date for its earnings.
State Bank of India, HSBC Holdings Plc and Axis Bank Ltd. are among lenders to the Mumbai-based carrier, which owes a total 94.3 billion rupees ($1.4 billion). It had cash and equivalents of 3.2 billion rupees at the end of March. A spokesman for HSBC declined to comment. Representatives for SBI and Axis Bank didn’t respond to calls and emails seeking comments.
Jet Airways has 31.2 billion rupees worth of loan repayments due in the year through March 2019, ICRA Ltd. said in May. The local unit of Moody’s Investors Service also lowered the airline’s rating a notch to BB+ with a negative outlook, a level that signals moderate risk of default regarding timely servicing of obligations, citing its inability to pass on increasing fuel costs to consumers.
Loans to Jet Airways are part of the 246 billion rupees in debt owed by companies that might struggle to repay, SBI Chairman Rajnish Kumar, told reporters on Aug. 10. He didn’t disclose further details citing client confidentiality agreement. On Monday, Jet Airways said there’s been no delay in meeting any of its loan obligations and no loan amount overdue.
Rising crude oil prices, leading to higher jet fuel costs, have hurt other carriers in the region as well. Cathay Pacific Airways Ltd., which is in the midst of a three-year transformation program, reported a surprise loss for the first half of the year, while Singapore Airlines Ltd. said profit dropped 59 percent in the quarter to June.
India, the world’s fastest growing aviation market, is also one of the toughest to operate in, as carriers are forced to sell tickets below cost to attract a fast-growing middle class. Kingfisher Airlines, started by Indian tycoon Vijay Mallya in 2005, was one of the nation’s leading carriers until it was grounded in 2012 amid mounting debt, while Air India Ltd. is surviving on repeated taxpayer bailouts of billions of dollars.
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