SpiceJet to get partial relief from Sebi after debt recast deal with lessor

Airline won't have to appoint independent valuer but Carlyle will need to follow six-month lock-in

Beleaguered airline SpiceJet may get partial relief from the Securities and Exchange Board of India (Sebi) for a preferential allotment to the aircraft lessor Carlyle Aero Group.

In an informal guidance letter dated May 23, the markets regulator has said that the rules around appointing an independent valuer under the Issue of Capital and Disclosure Requirements (ICDR) will not be applicable on the allotment to Carlyle.

However, the aircraft lessor will have to observe a six-month lock-in period on the proposed issuance of equity shares under the Regulation 167(2) of ICDR norms.

SpiceJet has an outstanding liability of paying rent to Carlyle and the issuance of preferential equity shares is a means to fulfil the rental obligations.

“This would amount to issuing preferential shares in lieu of cash, being the monetary liability which the company is subjected to. In view of the above, the proposed issuance of equity shares, which will serve to offset monetary obligations owed to the aircraft lessors and will be allocated to these lessors as new equity shares, will not be covered under the provisions of Regulation 163(3) of the ICDR Regulations,” noted Sebi.

With this relaxation, SpiceJet will be exempt from submitting a valuation report to valuation report by an independent registered valuer to the stock exchanges. Usually, if the stock exchanges are not satisfied with the appropriateness of the valuation, they may get the valuation done by any other valuer also and seek further information from the company.

In a letter submitted to Sebi dated March 20 seeking informal guidance, SpiceJet had submitted that the preferential allotment will be for their existing outstanding lease payment liabilities of around $29.5 million.

Informal guidance is a facility under which any entity can seek an opinion from the regulator on a legal issue. The guidance, however, is a view of Sebi’s department and may not be legally binding.

The allotment is proposed at Rs 48 per equity share or a Sebi-determined price, whichever is higher. As of Wednesday, the shares of SpiceJet closed at Rs 26.1 on BSE, recording a surge of nearly 8 per cent in the day.

In the letter the aviation company informed Sebi that following the allotment, the shareholding of promoters in SpiceJet will go down to 54.8 per cent from the current 59.39 per cent.

Following the board meeting on February 27, the aviation company had announced that it had restructured over $100-million dues to aircraft lessor Carlyle Aviation Partners into equity and compulsorily convertible debentures.

According to the debt-restructuring plan by the airline, Carlyle will also get compulsorily convertible debentures worth $65.5 million in SpiceXpress and Logistics Private Limited, the airline’s cargo subsidiary, in exchange for lease liabilities.

Earlier, SpiceJet had entered into settlements with other lessors such as Avolon and Goshawk. Sebi’s guidance comes as a breather for the airline, which has been facing cash crunch and funding delays.