Mumbai, Feb 23: Standard Chartered Bank, along with UTI Bank have lead-managed a Rs 1,600-crore credit-enhanced, securitised pass through certificates (PTCs) placement for Jet Airways. The PTCs represent the future hire-purchase rentals of Jet Airways and the proceeds will be used to acquire 10 new Boeing 737 aircraft.The PTCs were subscribed to by the Unit Trust of India, Life Insurance Corporation, Bank of Baroda, Bank of Maharashtra and HDFC Bank. State Bank of India credit-enhanced the PTCs by guaranteeing the principal and the interest on them. The entire transaction is guaranteed by the US Exim Bank. The Indian rupee leg is the largest securitisation transaction in the local market.
The door-to-door tenure of the PTCs is 12 years (seven-year average) with a draw down period of 30 months. Interest rates will float in a band of 60 basis points, until the time of draw down of each of the 10 tranches. They would then be fixed at a margin over government dated-stock of seven-year tenure. The structure allows Jet Airways to have a rupee liability, even though the US Exim Bank continues to have a dollar-guarantee. The US Exim Bank guarantee was used to raise dollar funds and placed with SBI as collateral, against which SBI issued a guarantee to secure the Indian investors in the PTCs.
The aircraft will be acquired by an overseas special purpose vehicle (SPV) and given to Jet Airways on hire purchase. The future hire purchase rentals of Jet Airways, denominated in rupees were securitised to issue PTCs for raising rupee-funds to fund the acquisition of the aircraft. All the above transactions took place simultaneously during the closure of the transaction.
Jet Airways has entered into a contract with Boeing for the purchase of 10 new 737 aircraft at a total cost of $420 million. The US Exim Bank agreed to guarantee the funding to the extent of 85 per cent of the acquisition cost of the aircraft. The first of the 10 aircraft under this funding scheme was delivered to Jet last week.
Jet Airways earns about 30 per cent of its revenues in foreign currency, while it has a large foreign currency debt on its balance sheet. The company was, therefore, looking to finance the purchase through rupee-debt. Raising foreign currency debt using the US Exim Bank guarantee, though cheaper in dollar terms, would have further increased its foreign currency debt.
Copyright © 2001 Indian Express Newspapers (Bombay) Ltd.
