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ICRA downgrades crisis-hit Jet Airways' credit rating; lenders seek details on root cause of financial stress

Credit rating agency ICRA has downgraded crisis-hit Jet Airways' with 'D' ratings after the airline defaulted on loan repayments to banks.

"This rating downgrade considers the delay by the Company in the payment of interest and principal instalment due on 31 December, 2018 due to cash flow mismatches and delays in the implementation of proposed liquidity initiatives by the Company," Jet Airways informed stock exchanges on Wednesday.

ICRA had earlier cut the rating on Jet Airways borrowing programmes. In another regulatory filing with BSE on Wednesday, the airline said: “ICRA Limited has revised the long term “ICRA Limited has revised the long term rating (assigned to long term loans and non-convertible debentures) to ICRA-D from ICRA-C. The short term rating has been revised to ICRA- D from ICRA-A4. This rating downgrade considers the delay by the company in the payment of interest and principal installment due on 31 December, 2018, due to cash flow mismatches and delays in the implementation of proposed liquidity initiatives by the company.”

Shares of Jet Airways tumbled 5 percent to Rs 250.65 after ICRA downgraded the airline’s Rs 10,963 crore loan and debenture ratings.

The full-service carrier has been grappling with financial woes for quite some time now and has been making delayed salary payments to staff.

Jet Airways is in discussions with the State Bank of India for raising Rs 1,500 crore short-term loan to meet its working capital requirement and some payment obligations.

 ICRA downgrades crisis-hit Jet Airways credit rating; lenders seek details on root cause of financial stress

Representational image. Reuters

The airline's strategic partner and Middle East carrier Etihad, which holds 24 percent stake in the Indian full-service carrier, is likely to provide a guarantee for the loan.

However, lenders of the loss-making carrier want to know "the root cause of the financial stress and to make sure that there has not been any diversion of funds", according to The Times of India.

Significantly, the talks for availing loans are going on at a time when EY is carrying out a forensic audit of the Jet Airways on the orders of the airline's largest lender for alleged irregularities.

The recent cut in the prices of Aviation Turbine Fuel will provide much-needed relief to the cash-strapped airline. Jet fuel price on Tuesday was cut by a record 14.7 percent on the back of decline in international rates, making it cheaper than both petrol and diesel. This is the second straight monthly reduction in rates and the biggest single cut ever.

The Naresh Goyal-controlled airline, which has posted three consecutive quarterly losses of over Rs 1,000 crore each since March, already has as much as Rs 8,052 of debt on its books as on 30 September.

With its financials in peril and the airline facing cash drought, promoter Goyal is looking to infuse capital in a manner where he does not have to lose control of the airline he set up 25 years ago.

--With inputs from agencies 

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Updated Date: Jan 03, 2019 15:13:10 IST