PNB helps Jet stay afloat with Rs 2,050 crore lifeline

Mumbai: Punjab National Bank (PNB) has provided a loan of Rs 2,050 crore to Jet Airways Ltd, following which the shares of the cash-strapped carrier surged as much as 4.8 percent to Rs 255 on Monday, the highest in more than a month. The move could prove to be a lifeline for Jet, which has raised foreign currency term loans amounting to Rs 1,100 crore and a non-fund based credit facility of Rs 950 crore from the state-run lender.

Funds to be used for rental dues to lessors, salary arrears

Jet plans to use the money primarily to pay rental dues to aircraft lessors and salary arrears, a source said. However, documents related to the loan details say the carrier will use the credit facility for its working capital requirements. No Jet Airways spokesperson has made a comment on the matter.

The loan proceeds might possibly improve Jet Airways’ credit rating if they are used to paying dues to lessors and for cutting down on the company’s debt.

A spokesperson from Etihad Airways PJSC, which has 24 percent stake in Jet Airways, said: “As a minority shareholder, Etihad continues to work constructively with the Jet Airways board, management team and other stakeholders.”

Credit facility raised in two lots

Via separate agreements with the lender, the credit facility has been raised in two lots. In the first agreement, Jet received a credit facility of Rs 1,050 crore, including a term loan in dollars worth Rs 350 crore and a non-fund based facility of Rs 700 crore. The second agreement, a credit facility of Rs 1,000 crore, comprised a term loan of Rs 750 crore and a non-fund based facility of Rs 250 crore.

“The loan has been raised in dollars at a stronger rupee as compared to the value of rupee now. So, there is a cost arbitrage, which could help the company to repay larger amounts of rupee loans,” the source said.