Jet raises Rs 1,000 cr from Indian banks

Mumbai: Jet Airways has raised about Rs 1,000 crore from a South-Indian bank and a nationalised bank to meet its working capital requirements.
Both the banks have issued letters of credit to the airline, said a source close to the development. Jet Airways has been in the midst of a cash crunch for a while now.
It is not known whether Jet Airways will pledge company shares or any kind of collateral for the transaction. Jet Airways owes Rs 1,057 crore to large oil firms—Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum. Jet Airways and Jetlite have defaulted on a payment of Rs 32.78 crore to AAI. The airline desperately needs the funds to pay off AAI. Civil aviation minister Praful Patel had given instructions to AAI to take all possible steps, including legal action, if warranted, against all defaulting airlines.
A Jet Airways executive confirmed that the deal with the two Indian banks was sealed last week, but declined to share details. A detailed email query and two text messages from Etthat sent to Jet Airways spokesperson on Saturday remained unanswered.
It is gathered that Naresh Goyal, the airline’s chairman, is negotiating with overseas-based institutions for debt funding at higher interest rates. KPMG senior consultant Mark Martin said: “Funds are readily available from institutions. Lenders however decide on the terms and conditions which are generally at higher interest rates.”
The risk associated with the sector is something that has been an area of concern. Analysts maintain that lending to a sector that is deep in the red is a tough decision. In the current market scenario, it is felt that Jet does not have too many options apart from raising debt.
29/12/08 Mithun Roy/Economic Times

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Categories: Jet Airways Dec 2008