Goldman joins Ross in $100 mn SpiceJet funding

Mumbai/New York: US investment house Goldman Sachs Group Inc. will invest $20 million, or Rs84 crore, in low-fare airline SpiceJet Ltd through equity warrants, in addition to an $80 million infusion into the company that will result from WL Ross and Co. Llc., a private equity fund from New York, buying out foreign currency convertible bonds from Goldman Sachs and Istithmar PJSC for an equivalent amount.
WL Ross, run by a billionaire businessman of the same name, has agreed to invest $80 million in two tranches, while Goldman Sachs will release 10% of $20 million immediately and the remaining over 18 months.
Until now, some $80 million, raised by SpiceJet for paying advance for aircraft purchase, was locked up in an escrow account based on collateral arrangements with Goldman Sachs and Istithmar PJSC that did not allow the money to be used. The Ross deal frees up that cash.
“This total investment of $100 million infusion will take care of airline’s capital requirements for the next two years,” a senior director on the airline’s board said. The director, who did not want his name to be disclosed, said the deal will not trigger an open offer as both the investors are not converting their bonds or warrants for the time being.
Another director said the airline, in consultation with new investors, has already appointed a head-hunter to spot a candidate to lead the firm, following the resignation of Siddhanta Sharma, the earlier chief executive.
The deal, first announced on 15 July, “will make SpiceJet a well funded company even in difficult times where carriers are struggling for funds,” Ajay Singh, a SpiceJet director, told Mint. “This will help us in emerging as a strong player in the market as we already have 10% market share.”
12/08/08 P.R. Sanjai and Tarun Shukla/Livemint

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Categories: Foreign Aug 2008, SpiceJet Aug 2008