Introduction
On September 9, shares of budget airline SpiceJet experienced a notable uptick, rising by 5% in early trading. This movement came on the heels of an important restructuring announcement made by the company on September 6. SpiceJet outlined a plan to navigate its financial challenges, which involved converting significant debt into equity and seeking new funding sources. This article delves into the specifics of SpiceJet’s restructuring efforts, its current stock performance, and the strategies it aims to employ to recover from its ongoing struggles.
Latest Restructuring Plans
SpiceJet has revealed plans to convert $137.6 million of debt owed to Carlyle Aviation Management into equity shares. After adjustments, the total amount pertaining to this conversion will be $97.5 million. The airline plans to issue shares at a price of Rs 100 per share, with the total value of the equity shares not exceeding $30 million. Carlyle Aviation, which specializes in leasing aircraft, is also considering investing an additional $20 million in SpiceXpress & Logistics Private Limited, a subsidiary of SpiceJet, to settle outstanding dues.
Stock Market Performance
In the morning session following these announcements, SpiceJet shares opened at Rs 63.65 on the BSE. The stock quickly surged, gaining 5.5% to reach a high of Rs 64.86. The company’s current market capitalization stands at approximately Rs 5,000 crore, with an upper price band set at Rs 73.75, allowing for a 20% circuit limit on trading. This spike in stock price signifies renewed investor interest and confidence in the company’s restructuring plans.
Promoter Stake Sale
In alignment with its fundraising efforts, Ajay Singh, the promoter and current chairman of SpiceJet, is contemplating the sale of over 10% of his stake in the airline. This strategic move, which could climb to a 15% stake sale if conditions permit, is anticipated to occur by the end of September. SpiceJet aims to utilize the capital from this sale to address various financial obligations and operational challenges currently facing the airline, which include legal issues and a pressing need for liquidity.
Future Financial Strategies
In a detailed presentation, SpiceJet outlined its ambition to raise Rs 3,200 crore through various means, including Qualified Institutional Placements (QIP), warrants, and capital infusion from promoters. The bulk of this capital, about Rs 2,500 crore, is targeted to be accrued through QIP, while an additional Rs 736 crore will derive from previous warrants and direct promoter contributions. The funds will be pivotal in facilitating the reactivation of grounded aircraft, settling incurred liabilities, and procuring new aircraft, thereby fortifying the airline’s operational capacity.
Conclusion
As SpiceJet embarks on this restructuring journey, its efforts to convert debt to equity and raise significant funds through stakeholder collaboration signal a proactive approach to overcoming its current plight. The positive response from the stock market reflects investor optimism, but the airline’s long-term recovery will depend on successfully executing its plans and restoring operational stability.
