ICRA downgrades Jet Airways’ rating
MUMBAI: Credit rating agency ICRA on Thursday said it has downgraded Jet Airways’ long-term borrowing programme, highlighting yet again the acute financial crisis India’s second-biggest airline is facing.
It downgraded the long-term rating for the airline’s borrowing programme to B from BB. According to ICRA’s Web site, a B rating translates into instruments “considered to have high risk of default regarding timely servicing of financial obligations.” The earlier rating of BB signified a moderate risk of default.
The rating was assigned to Jet’s Rs 698.9-crore, non-convertible debenture programme, Rs 4,970 crore of long-term loans, Rs 645 crore of long-term, fund-based facilities, and Rs 700 crore of long-term and non-fund based facilities. ICRA reaffirmed the short-term rating assigned to the airline’s Rs 3,950-crore short-term, non-fund based facilities at A4, which means a “minimal degree of safety regarding timely payment of financial obligations,” according to the Web site. “Such instruments carry very high credit risk and are susceptible to default.”
Jet has been going through a financial crisis, the signs of which have been delayed salaries, pay cuts to management, warning signals to employees about its health (which the airline denied), featuring on the default watch-lists of its lender (which it also denied), growing cash losses, and ongoing government probes over money laundering.
“The rating downgrade considers the delays in the implementation of the proposed liquidity initiatives by the management, further aggravating its liquidity strain,” ICRA said in a statement.
Jet gains on bourses
Jet Airways and its listed peers Indi-Go and SpiceJet gained on the bourses on Thursday, with analysts attributing the rise to expectations of an excise duty reduction on jet fuel. No cut, however, was announced.
Jet closed 11.04% up at Rs 197.10, Interglobe Aviation that operates IndiGo gained 5% at Rs 816.35, while SpiceJet closed 8.85% higher at Rs 68.25. Rising prices of jet fuel, the highest cost component for an airline, have led to worsening financial health at domestic carriers.
It downgraded the long-term rating for the airline’s borrowing programme to B from BB. According to ICRA’s Web site, a B rating translates into instruments “considered to have high risk of default regarding timely servicing of financial obligations.” The earlier rating of BB signified a moderate risk of default.
The rating was assigned to Jet’s Rs 698.9-crore, non-convertible debenture programme, Rs 4,970 crore of long-term loans, Rs 645 crore of long-term, fund-based facilities, and Rs 700 crore of long-term and non-fund based facilities. ICRA reaffirmed the short-term rating assigned to the airline’s Rs 3,950-crore short-term, non-fund based facilities at A4, which means a “minimal degree of safety regarding timely payment of financial obligations,” according to the Web site. “Such instruments carry very high credit risk and are susceptible to default.”
Jet has been going through a financial crisis, the signs of which have been delayed salaries, pay cuts to management, warning signals to employees about its health (which the airline denied), featuring on the default watch-lists of its lender (which it also denied), growing cash losses, and ongoing government probes over money laundering.
“The rating downgrade considers the delays in the implementation of the proposed liquidity initiatives by the management, further aggravating its liquidity strain,” ICRA said in a statement.
Jet gains on bourses
Jet Airways and its listed peers Indi-Go and SpiceJet gained on the bourses on Thursday, with analysts attributing the rise to expectations of an excise duty reduction on jet fuel. No cut, however, was announced.
Jet closed 11.04% up at Rs 197.10, Interglobe Aviation that operates IndiGo gained 5% at Rs 816.35, while SpiceJet closed 8.85% higher at Rs 68.25. Rising prices of jet fuel, the highest cost component for an airline, have led to worsening financial health at domestic carriers.
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