If a default occurs, it would be bad news for Jet as the EXIM bank would deregister and take back the planes.
Cash-strapped Jet Airways has delayed repayments to global lenders including Citibank that funded the purchase of its Boeing 777 planes, The Economic Times reported. The repayments, worth over $18 billion, were due at the end of March.
The banks loaned funds to the carrier based on guarantees from Export-Import (EXIM) Bank of the US, which can be invoked in case of a default. If a default occurs, it would be bad news for Jet as the US bank would deregister and take back the planes.
"Jet has requested these foreign lenders to condone the payment delay. It has asked for time as local banks are trying to put together a revival package," a source told the paper. EXIM Bank is the official export credit agency of the US and backs Boeing's exported planes. Jet's payments to EXIM Bank can be pegged around Rs 1,433 crore.
The Indian banks, led by the State Bank of India are yet to provide the Rs 1,500 crore to Jet that it had assured. "Banks are ready to give loans, but they would be more comfortable in disbursing funds if there is equity infusion by Etihad or some other investor. But no investor has given any firm commitment," a senior banker said.
While there is a delay in payment for Boeing planes, Jet is within the cure period and in touch with a financer to get the payment done – another source, however, said. The airline is on a finance lease agreement for 10 Boeing 777 planes, which is not like an operating lease.
A finance lease is similar to EMIs. The airline owns the aircraft after the payment. In an operating lease, the aircraft goes back to the lessor.
Jet had plans to use these planes as collateral to raise more funds. It bought these 10 Boeing planes in 2005-06 after buying 10 Airbus A330s for its international flights.
Almost two-thirds of Jet's fleet have been grounded due to non-payment of its dues. The carrier was counting on these planes to operate on its long, international routes to London and Amsterdam. Jet owns 17 aircraft only. The most of those are Airbus A330 and Boeing 777 planes. The rest are on a lease.
Jet Airways has a debt of over Rs 8,500 crore and an immediate funding requirement of Rs 1,500 crore. The board of the airline approved a plan last month that would give its lenders over 50 percent of its shareholding. Founder and Chairman Naresh Goyal resigned from his position, along with two other directors.The bidding process for Jet will start on April 8 when the banks will open expressions of interest for suitors, and the bidding will close on April 10.