W L Ross, Istithmar convert Spicejet bonds

W L Ross and Istithmar Capital are converting the bonds held by them in Spicejet, India’s fastest growing low-fare airline.

This comes amid reports that Sun TV Networks chief Kalanithi Maran is close to picking up a controlling stake in the airine by acquiring the stake held by these two entities through convertible instruments.

In a statement to the stock exchanges today, Spicejet said it is allotting 64 million equity shares of Rs 10 each to these investors upon conversion of the foreign currency convertible bonds (FCCB) held by them.

The 64 million shares would amount to a 19.87 per cent stake, after taking into account equity capital dilution upon conversion of bonds including those held by Goldman Sachs, which has around 6 per cent stake. The entities held by Wilbur Ross would get a 13 per cent stake while the rest will be held by Istithmar.

While Spicejet has not disclosed the conversion price of the bonds, Goldman had converted the warrants held by it at a premium of Rs 29.50 a share.  At 2 pm, the Spicejet stock was trading 0.95 per cent lower at Rs 57.30 compared to its overnight close

Various entities controlled by WL Ross like WLR Recovery III (India) Limited, WLR Recovery IV/ESC (India) Limited, India Asset Recovery Fund Limited and WLR/GS (India) Limited have picked up stake in Spicejet.

The promoters led by NRI businessman Bhula Kansagra owns 12.8 per cent in the company which shrinks to 12 per cent (over 50 per cent of these shares are pledged) after the equity allotment to Goldman Sachs. Among other stakeholders, one promoter Ajay Singh and his family hold 10 per cent.

After establishing itself as an efficient low-cost carrier, Spicejet finally reported a profitable year for the year ended March 2010. Revenues grew 29 per cent to Rs 2,181 crore. Lower fuel costs and tight control on expenses propped up earnings before interest, tax, depreciation and amortisation (Ebitda) margins to one per cent. The airline was earlier losing around Rs 25 per Rs 100 revenue. It reported a net profit of Rs 61.45 crore compared to the steep loss of nearly Rs 334 crore in 2008-09.