Indian Low cost carrier Spicejet's Funding crisis deepens - Promoter Ajay Singh Denies Further Funding to the struggling carrier,says a court filing !

In the Month of May , the employees of the indian low cost carrier spicejet deferred the partial salaries of it's workers, which seemed to be an indication of the state of Financial Liquidity, airline passing through.

India's Aviation industry saw it's worst , with most of the carriers and travel industry crippling under the wrath of second wave of COVID-19, Spicejet received it's share of disadvantages. 

• While most of the major carriers across the globe received some kind of Government financial assistance in the form of Aid or Loans, Indian carriers are struggling to infuse the much needed energy to their finances.
• Spicejet hopes to raise ₹570 crore (775mn $), ‘fully collateralised’, from existing lender banks.

Spicejet is passing through the phase , where fund raising is the only hope to stay afloat in this Pandemic, when Promoter Ajay singh has denied to infuse further funds to the carrier.

Sources of  Hindu BusinessLine says , during the Court proceedings of a dispute with OEM De havilland, SpiceJet has informed the Delhi High Court that its promoter Ajay Singh has declined to infuse fresh funds in the debt-strapped airline.

“Singh has expressed his inability to inject further funds in the Company in his individual capacity. SpiceJet has also approached its bankers for additional credit facilities and other mechanisms for raising funds,” SpiceJet said in the court filing.

When Hindu Businessline contacted the Indian carrier for a comment, a SpiceJet spokesperson said,

“Singh is committed to the well-being and sustenance of SpiceJet and has already collateralised his considerable stake in the company with various banks. In fact, he has also offered to infuse more funds as part of SpiceJet’s proposal to bankers.”

Regarding raising of  funds, the spokesperson added that,

“SpiceJet is a low-debt company with significant collateral with banks. The company has requested banks to allow it to utilise fully collateralised unutilised limits.” 

Issues with De Havilland Aircraft of Canada !

Earlier on February 21, De Havilland Aircraft of Canada Ltd  had secured a summary judgment against SpiceJet, on its U.K. Commercial Court claim for the sum of approximately US$43 million and applicable interest, owing under a Purchase Agreement for 25 Dash 8-400 aircraft . That time The Court also dismissed SpiceJet’s Counterclaim for damages.

Back ground story says, in January 2020, Canadian De Havilland terminated two sets of Aircrafts alleging SpiceJet’s failure to pay the relevant pre-delivery payments (PDPs) ;and , having terminated the requisite four Aircraft, De Havilland terminated the entire Purchase Agreement in February 2020 and initiated the proceedings for liquidated damages and declaratory relief.

While SpiceJet did pay for and take delivery of the first 5 aircraft, it failed to make the PDPs for the next 20 aircraft and failed to take delivery of aircraft 6 to 8.  De Havilland sought to terminate the undelivered aircraft and the Purchase Agreement and claimed liquidated damages in the sum of US$42.95 million.

However,SpiceJet  had argued that the suspension of the scheduled delivery months amounted to a suspension of the date for payment of the PDPs since the dates on which the PDPs became payable were dependent upon the scheduled delivery months. 

SpiceJet also made the claim that De Havilland was in breach of its obligation to provide assistance because it failed to obtain financing from potential finance counterparties, with whom it had been negotiating with De Havilland.