SpiceJet Debt Recast: Carlyle Aviation To Pick Up 7.5% Stake In Airline

Low-cost carrier SpiceJet said on Monday that its board had restructured over $100-million (Rs 829-crore) dues to aircraft lessor Carlyle Aviation Partners into equity and compulsorily convertible debentures. The development comes after months of negotiations and approvals from lenders and lessors.

Carlyle Aviation will receive a 7.5 per cent stake in SpiceJet and compulsorily convertible debentures in the airline’s cargo subsidiary as part of the debt-restructuring plan.

Carlyle Aviation will be issued fresh equity shares worth $29.5 million (Rs 244 crore) of the airline at Rs 48 a share or at a Sebi-determined price, whichever is higher. Additionally, the lessor, which has 13 aircraft with SpiceJet, will also get compulsorily convertible debentures worth $65.5 million (Rs 542 crore) in SpiceXpress and Logistics Private Limited, the airline’s cargo subsidiary, in exchange for lease liabilities, the company said.

The airline’s board also approved hiving off its cargo business into a separate unit, subject to a final no-objection from lenders, it said.

The airline also announced a settlement with leasing firm Castelake, and a Rs 2,500-crore fundraise plan.

Shares of SpiceJet surged about 6 per cent in intra-day trade, but closed almost flat at Rs 39.90 apiece on the BSE. At the close of trade, its market capitalisation stood at Rs 2401 crore.

“Carlyle Aviation Partners picking up a stake in our passenger and cargo business reinforces the huge potential of SpiceJet and SpiceXpress. Carlyle, a global aviation leader, partnering us will tremendously boost our business,” SpiceJet Chairman Ajay Singh said in a statement. “The transaction will substantially deleverage our balance sheet, thereby allowing us access to fresh funds at a competitive rate, and we aim to follow suit with other lessors as well in the near term,” he said.

The airline said the compulsorily convertible debentures will be converted into equity shares of SpiceXpress at an anticipated future valuation of $1.5 billion, but did not share further details.

According to a source, the cargo business hive-off brings more focus on the business and will enable the company to tap fresh funding.

Currently, the airline has three freighters and more are expected to join the fleet. Between FY20 and FY22, the airline's cargo revenues rose from Rs 180 crore to Rs 1,943 crore.

The debt restructuring comes as a breather for the airline, which has been facing cash crunch and funding delays. Safety issues and ongoing litigation with the former promoter have been other challenges. Its market share too has slipped in the face of increased competition in the domestic market.

In the past few months, SpiceJet has entered into settlements with other lessors such as Avolon and Goshawk. The airline reported a net profit, of Rs 110 crore, in Q3FY23 after three consecutive loss-making quarters and is looking to raise fresh debt under the ECLGS scheme. The induction of new Boeing737 Max aircraft has been slow, and the company has had to resort to wet-leasing planes from a foreign operator for capacity expansion.