Jet Airways India Ltd. has missed payment to lenders, prompting ratings agency ICRA to downgrade the rating to ‘D’ or default grade due to the default and the inability of the airline to mobilise funds to improve liquidity. The share price of the air carrier ended the day with a decline of 6.16% on the BSE.
In a filing with the stock exchanges, Jet Airways said payment of interest and principal instalment due on December 31 to a consortium of Indian banks led by State Bank of India “has been delayed due to temporary cashflow mismatch” and that the company “has engaged with them in relation to the same.”
The filing did not specify the amount due. “The ratings downgrade considers the delays by the company in the payment of the interest and principal instalment due on December 31, 2018 due to cash flow mismatches. There have been delays in the implementation of the proposed liquidity initiatives by the management, which have aggravated its liquidity,” ICRA said in a report.
Salary delays
“The company has already been delaying its employee salary payments and lease rental payments to the aircraft lessors. Furthermore, the company has large debt repayments due over December 2018 to March 2019 (₹1,700 crore), FY2020 (₹2,444.5 crore) and FY2021 (₹2,167.9 crore), it added.
As on September 30, 2018, the company had a gross debt of ₹8,411 crore, as against ₹8,403 crore, as on March 31, 2018.
This, despite the receipt of lease incentives during June 2018 and advances from Jet Privilege Private Ltd. in October 2018.
“The debt levels are, however, expected to increase in the near term because of the ongoing stress on profitability, unless the company is successful in its liquidity initiatives. Overall, till the company starts reporting profits on a sustained basis, the debt levels are expected to continue to remain high,” the ratings agency said.
The company has repayments of ₹1,700 crore due over December 2018 to March 2019, ₹2,444.5 crore in FY2020 and ₹2,167.9 crore in FY2021.
In the absence of adequate cash accruals, the company requires refinancing for its repayments falling due.
The company’s liquidity position is stressed with operating losses, high debt levels and negative networth, the report said.
The stock tanked 6.16% to close at ₹263.75 on the BSE. The company’s market valuation slumped by ₹195.87 crore to ₹2,996.13 crore on the BSE.
(With PTI inputs)