MUMBAI: Cash-rich Middle-Eastern airline Etihad has extended a low-interest loan of $300 million to Jet Airways, a sweetener that will help the debt-laden domestic carrier reduce its borrowing costs.The loan has been offered at a jaw-dropping rate of 3%, and could lead to sizeable savings for Jet, a company official said. "We'll save about $30 million annually on interest alone," the official added. The airline now pays an average annual rate of 14%. Jet will use the money to partially replace its high-cost loans. The airline had a debt of $2.1 billion at the end of December 2012 and is paying an annual interest of about 1,000 crore.
Meanwhile, the company announced the details of its preferential allotment plan to Etihad to the stock exchanges, and said Etihad will be allotted three seats on Jet's board. Tailwinds, the Isle of Man company promoted by Naresh Goyal, has also transferred its holding in Jet AirwaysBSE 1.79 % to Goyal, paving the way for the airline to increase its public shareholding by 5% in line with the country's capital market regulations. A Jet official said road shows are going on and the offer for sale will be completed by the end of the month. Indian aviation regulations do not permit foreign equity to be more than 49%. Goyal is an NRI and his personal holding is not considered as foreign equity.
"The deal comes as a big boost for Jet Airways. It is not just about equity infusion but also network expansion and top-line growth. It will help lighten Jet's debt burden of around 12,000 crore and its large current liabilities," says Amber Dubey, partner and head of aviation at global consultancy KPMG.
The $300-million loan will be in addition to the $600 million the Abu Dhabi-based airline has forked out for the 24% stake, the Heathrow slots owned by Jet, and the purchase of the airline's frequent flier programme. Etihad will be facilitating this loan through their bankers, and we'll securitise our accruals to repay the five-year loan, a Jet official said.
"The loan is likely to be extended through Etihad's bankers," a source with direct knowledge of the deal told ET. The name of the bank was not immediately available as the deal is still to be put in place.
Debt along with the purchase of an equity stake is not unusual in international aviation deals. Etihad had lent $263 million to Air Berlin when it bought a stake in the German carrier sometime back.
http://economictimes.indiatimes.com/news/news-by-industry/transportation/airlines-/-aviation/etihad-extends-soft-loan-worth-300-million-to-jet-airways-to-reduce-jets-borrowing-cost/articleshow/19789769.cms
Meanwhile, the company announced the details of its preferential allotment plan to Etihad to the stock exchanges, and said Etihad will be allotted three seats on Jet's board. Tailwinds, the Isle of Man company promoted by Naresh Goyal, has also transferred its holding in Jet AirwaysBSE 1.79 % to Goyal, paving the way for the airline to increase its public shareholding by 5% in line with the country's capital market regulations. A Jet official said road shows are going on and the offer for sale will be completed by the end of the month. Indian aviation regulations do not permit foreign equity to be more than 49%. Goyal is an NRI and his personal holding is not considered as foreign equity.
"The deal comes as a big boost for Jet Airways. It is not just about equity infusion but also network expansion and top-line growth. It will help lighten Jet's debt burden of around 12,000 crore and its large current liabilities," says Amber Dubey, partner and head of aviation at global consultancy KPMG.
The $300-million loan will be in addition to the $600 million the Abu Dhabi-based airline has forked out for the 24% stake, the Heathrow slots owned by Jet, and the purchase of the airline's frequent flier programme. Etihad will be facilitating this loan through their bankers, and we'll securitise our accruals to repay the five-year loan, a Jet official said.
"The loan is likely to be extended through Etihad's bankers," a source with direct knowledge of the deal told ET. The name of the bank was not immediately available as the deal is still to be put in place.
Debt along with the purchase of an equity stake is not unusual in international aviation deals. Etihad had lent $263 million to Air Berlin when it bought a stake in the German carrier sometime back.
http://economictimes.indiatimes.com/news/news-by-industry/transportation/airlines-/-aviation/etihad-extends-soft-loan-worth-300-million-to-jet-airways-to-reduce-jets-borrowing-cost/articleshow/19789769.cms
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