Jet to raise capital through PE route

India’s largest private airline Jet Airways is in negotiations with private equity players Blackstone, TPG Capital and Temasek for raising Rs 400-450 crore reported the Economic Times.

The company is raising money for meeting the operational expenses of running the loss-making Air Sahara, which it recently acquired. The operational expenses for Jet are huge since Air Sahara is not very profitable. Reportedly TPG Capital is looking to co-invest along with Singapore-based fund Temasek, while Blackstone is considering going solo.

The promoters currently hold 80% stake in the company which will come down proportionately along with the other shareholders’ stake. The private equity investor may take 8-9% stake.

Jet Airways recently acquired Lucknow-based Air Sahara in a deal valued at Rs 2,300 crore. While Jet had paid Rs 400 crore upfront, it will pay Rs 550 crore in four annual instalments, starting next year. Air Sahara will be renamed JetLite and will be a 100% subsidiary of Jet Airways.

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Jet Airways to buy Air Sahara for around Rs. 1450 crores
Jet Airways seeking $400 mn via private equity

Jet Airways to buy Air Sahara for around Rs. 1450 crores

Jet Airways has agreed to buy out Air Sahara for around Rs. 1450 crores, lower than what it had agreed to pay (Rs. 2300 crores) in January 2006 when the two had signed a contract that got into trouble and litigation.

Both the airlines have seemed to have reached an agreement on the commercial aspects of the deal, which will be submitted to the arbitration panel on 12th April at 5.30 pm, after two days of hectic negotiations. The offer includes Rs. 500 crores that Jet had paid Air Sahara last year. However, it is unclear whether the deal includes the Rs. 300-350 crore-debt on the books of the latter. The offer will not include Rs. 180 crores that Jet had already paid in April 2006 for the normal business operations of Air Sahara.

Jet Airways, in January last year, had signed a share-purchase agreement to acquire 100% equity of Air Sahara. As part of the deal, Jet paid Rs. 180 crores for Air Sahara’s revival and Rs. 500 crores for Air Sahara shares besides depositing Rs. 1500 crores in an escrow account opened for the purpose. However, the deal got into trouble after Jet cited lack of government clearance as the reason to walk out of the deal. The matter then went to court that ordered for the arbitration.

Read more in The Economic Times.

Jet Airways seeking $400 mn via private equity

Jet Airways is in talks with private equity firms to raise $400 mn (over Rs. 1760 crores) through qualified institutional placements (QIPs) for its aircraft acquisition plans. The QIPs will be used to improve the airline’s balance sheet as well as raise 15% of the cost of its $2.5 bn bill for 20 wide-bodied aircrafts for international operations and 10 Boeing 737s for domestic operations. The rest of the bill will be funded by debt.

The QIP could dilute the promoters’ equity by 10%, who currently hold 80% in the airline. The airline is also considering a follow-on issue or a combination of QIP investments and equity expansion. Interestingly, the airline has dropped plans for a $500 mn FCCBs issue. The airline would extend its international operations to North America, Europe, Africa and Asia once it acquired the wide-bodied jets. Besides its $2.5 bn acquisition programme, Jet Airways also plans to buy 10 Boeing 787-8 Dreamliners. Deliveries are scheduled between July 2011 and December 2012.

Read the Business Standard article.