Jet's woes deepen; airline defaults on loan repayment

The first tranche of $31 million was due on March 11, while the second instalment of $109 million was due on March 28.

Jet Airways has defaulted in repaying $140-million loan to HSBC Bank.

The airline informed stock exchanges that the payment of external commercial borrowings due on Thursday was delayed because of temporary liquidity constraints and it was engaged with the bank regarding the same.

The first tranche of $31 million was due on March 11, while the second instalment of $109 million was due on Thursday.

The airline has failed to pay both the tranches.

The default takes place three days after a change in guard in the airline and lenders commitment to provide Rs 1,500 crore in emergency loan to tide over financial crisis.

The loan deal was signed between Jet and HSBC in January 2014.

The $140-million loan was drawn for five years, with bullet repayment obligations at the end of the fifth year.

The loan was guaranteed by Eithad Airways, which now owns 12 per cent in Jet.

Jet, in a letter to HSBC on March 11, had said it is going through a severe liquidity crunch and is working on a bank-led resolution plan for its revival.

The plan, it has told the bank, is in the final stages of seeking regulatory and corporate approvals and pending these approvals, the company is unable to repay tranche of $31 million to the bank.

Photograph: Vivek Prakash/Reuters