SpiceJet separates from the air freight business

Effective April 1, budget airline SpiceJet Ltd spun off its freight and logistics division, SpiceXpress, into a separate entity, a move the cash-strapped airline says will unlock “significant” value for shareholders.

The split would strengthen SpiceJet’s balance sheet and pave the way for SpiceXpress to independently raise funds, the airline said in a statement.

As part of the restructuring, SpiceXpress will issue securities in the form of shares and mandatory convertible bonds for a total amount of Rs. 2,555.77 crore, which will be recognized by the airline as a one-time gain.

“The demerger will not only allow SpiceXpress to independently raise funds, but will also significantly reduce SpiceJet’s negative net worth. After restructuring over $100 million in outstanding fees to Carlyle Aviation Partners last month, the spin-off will further strengthen our balance sheet and deleverage,” said Ajay Singh, Chairman and Chief Executive Officer of SpiceJet.

In February, SpiceJet announced that aircraft rental company Carlyle Aviation Partners had agreed to restructure over $100 million of the airline’s fees into shares, with the latter acquiring a 7.5% stake in the airline.

“SpiceXpress will offer a stronger and more differentiated focus on the freight and logistics business and an opportunity to raise capital for the company to accelerate its growth,” said Singh.

Singh revealed last month that the airline has fresh capital of Rs. 2,500 crore and plans to add more aircraft to the fleet – narrow-body, regional and special cargo aircraft.

According to a report by brokerage firm Prabhudas Lilladher, City Union Bank, one of SpiceJet’s creditors, which until recently had an approximately Rs. 100 crore exposure to SpiceJet, has been repaid Rs. 35 crore from the airline. Other airline lenders include IDFC First Bank and YES Bank. During the April-December period, the airline recorded a profit of Rs. 51.4 crore.

On Monday shares of the airline closed at Rs. 31.10, up 2.8% on the National Stock Exchange.