Delhi High Court Orders SpiceJet To Pay $4 Million By Feb 15 Following Lessors’ Appeal

The Delhi High Court issued a stern directive to SpiceJet on Monday, instructing the budget carrier to settle a $4 million payment to its engine lessors, Team France 01 SA and Sunbird France 02 SAS, by February 15.

 

Despite requesting an extension for payment, SpiceJet proposed an initial payment of $1 million, with the remainder to be paid gradually.

SpiceJet is obligated to pay a total of $11 million to the lessors, with the company highlighting that it has returned three out of four engines, leaving only one in operation.

The lessors, expressing dissatisfaction with the carrier’s payment history, have urged for the grounding of the aircraft, citing what they perceive as leniency extended to SpiceJet despite minimal payment compliance.

Should SpiceJet default on the payment, the lessors assert they can demand grounding of the engine within a ten-day window.
Additionally, SpiceJet informed the court that it has already received an initial installment of $90 million, with an upcoming cash tranche of $4 billion expected shortly.

The case is scheduled for further proceedings on February 22, 2024.

SpiceJet’s Fundraising Efforts
SpiceJet announced its successful completion of raising Rs 744 crore as part of its refinancing initiative in a recent development.

The airline disclosed on Friday that its board had greenlit the allocation of 5.55 crore equity shares through preferential allotment to 54 subscribers.

Also, the board approved the issuance of 9.33 crore warrants on a preferential basis to Elara India Opportunities Fund Limited and Silver Stallion Limited.

Amidst the refinancing efforts, SpiceJet has sought an extension from regulators to finalize the remaining tranche of funding. This request stems from limited banking days attributed to extended weekends during the intervening period.

As part of a funding strategy disclosed in December, the financially strained SpiceJet carrier revealed its plan to raise fresh capital totalling Rs 2,250 crore from a consortium of 63 entities.

These entities comprise a mix of financial institutions, foreign institutional investors, high-net-worth individuals, and private investors, including Elara India Opportunities Fund, Aries Opportunities Fund, Mahapatra Universal Limited, Nexus Global Fund, Prabhudas Lilladher, and Resonance Opportunities Fund.

The capital infusion will occur in two installments: Rs 1,591.5 crore by June 2024 and Rs 650 crore by July 2025.

Upon completion of this funding endeavor, the airline’s promoter, Ajay Singh, is expected to see his current shareholding in the company decrease from 56.49% to approximately 38.55%, pending approval from shareholders for the issuance of equity and warrants.

Notably, 37.9% of Singh’s stake is currently pledged as collateral with various banks.

Singh emphasized that this investment injection is poised to facilitate the induction of fresh capacity and the reduction of liabilities, consequently diminishing the overall cost of capital.

He articulated, “It helps us to induct fresh capacity, settle some liabilities which we accrued during Covid. This will also give confidence to lessors, vendors,” underscoring the strategic importance of the raised capital in enhancing SpiceJet’s operational resilience.

SpiceJet is set to commence discussions with Boeing to resume the induction of new 737 Max aircraft, with an outstanding order exceeding 200 units.

The airline has relied on capital from its partners, which comes at a high cost, exacerbating its financial challenges.

Further, the company grapples with outstanding statutory dues such as TDS and other taxes, leading to accruing interest burdens. Singh stressed that this fundraising initiative aims to alleviate such financial encumbrances, significantly reducing the interest burden.

Recent reports indicate that SpiceJet successfully raised Rs 160 crore through the Emergency Credit Line Guarantee Scheme (ECLGS).

According to news, the airline secured funding exceeding Rs 1,100 crore within a span of three months with intentions to participate in the bidding process for the insolvent Go First; SpiceJet is also set to seek additional funds to fortify its financial position further.

The Last Bit, SpiceJet has been facing financial difficulties in recent months, including-