Jet misses payment deadline for its global lenders

PW Bureau

If guarantees are invoked, it could sound a death knell for the beleaguered airline as the US institution would likely deregister and then repossess the planes

New Delhi: As cash-strapped Jet Airways struggles to get back on its feet, the airline is living dangerously and has put its planes at risk as it delayed repayments worth more than US$18 million to global lenders who had lent on the back of guarantees from Export-Import (EXIM) Bank of the US. In case of a default, these guarantees can be invoked. If done, it could sound a death knell for the beleaguered airline as the US institution would likely deregister and then repossess the planes.

After Jet missed the due date for repayment in March-end, it requested its lenders to not pull the trigger. These banks, including Citibank, had financed the purchase of Boeing 777 planes for the airline.

A source said, “Jet has requested these foreign lenders to condone the payment delay. It has asked for time as local banks are trying to put together a revival package.” According to a presentation on the latest revival and fund infusion plan for Jet, payments to EXIM Bank were estimated to be Rs 1,433 crore.

The promised capital infusion from Indian lenders yet to come

According to a resolution plan approved on March 25 for Jet Airways, the consortium of Jet’s lenders led by the State Bank of India (SBI) took control of the airline and promised to infuse capital worth Rs 1,500 crores. However, the money is yet to come. “Banks are ready to give a loan. But they would be more comfortable in disbursing fund if there is equity infusion by Etihad or some other investor. But no investor has given any firm commitment…The government is busy with the elections,” said a source.

Etihad currently owns a 24 percent stake in Jet.

Can Jet make its case before its global lenders?

According to a person aware of the developments, even though there has been a delay on B777 payment, yet the fact that Jet is within the cure period and is communicating with its lenders to assure them of the payment might help its case. The person added that there has been no default notice as yet.

Jet has a finance lease agreement on the 10 Boeing 777s. This is different from an operating lease under which the aircraft goes back to the lessor at the end of the tenure. Under a finance lease agreement, payments are more like EMIs at the end of which an aircraft is typically owned by the airline. The Boeing 777 planes are Jet’s primary assets and are cited as collateral for additional loans that it aims to raise as part of the revival plan.