Lakshmi Niwas Mittal, the London-based billionaire who controls ArcelorMittal, the world’s largest steel company, is believed to have evinced interest in buying ailing low-cost carrier SpiceJet.
“He (Mittal) would like to go for a full buyout,” a source familiar with the development said.
This will require Mittal buying, apart from the promoters’ stake, the $80 million (Rs 350 crore) foreign currency convertible bonds (FCCBs) that SpiceJet issued to Istithmar, the Dubai government’s investment arm, and investment bank Goldman Sachs.
The Tatas hold around 7% stake in the airline. Mittal could not be reached for comment.
Mittal’s interest is a surprise because the airline doesn’t have a strategic fit with his businesses. “It doesn’t make any sense for Mittal to look at SpiceJet,” said an industry source.
On the other hand, liquor and aviation baron Vijay Mallya remains keen on scooping the no-frills carrier to lift Kingfisher’s market share above that of arch rival Jet Airways.
Meanwhile, Wilbur Ross, the US investor often called the ‘King of Bankruptcy’, who is close to Mittal (he is on ArcelorMittal board), wants to rework the terms of his investment in SpiceJet.
Ross had in July announced an investment of Rs 345 crore in the airline. SpiceJet sources insist that deal is not in danger, but they admitted it “may not be sealed on original terms”.
A source familiar with the development said Ross’ return to the negotiating table came after the Airports Authority of India (AAI) issued an ultimatum to SpiceJet to pay up dues or be charged landing and navigational fees on a cash-and-carry basis from August 1.
“After this ultimatum, Ross set down certain conditions before he injected funds into the airline,” the source said.
The conditions include writing down of dues to creditors and delivering operational performance within a specified timeframe.
Ross is also believed to be trying to negotiate the conversion rate of the FCCBs to as low as Rs 10 a share from the Rs 25 per share discussed when talks for the deal had closed, the source said. “Though Ross is keen on bringing in capital, he may not do it on original terms,” said the source. His fund has raised concerns over some legal issues too.
Ross had completed due diligence of SpiceJet on July 31.
A senior SpiceJet official confirmed that the AAI has extended the airline’s credit period till August 31. The official, however, was mum on whether Ross was renegotiating the terms of deal.
Sources said Ross may eventually not go for conversion of bonds into equity. “That is why there is no question of triggering an open offer (after breaching the 15% stakeholding as per Sebi rules) or hitting the ceiling of 49% on foreign direct investment,” said the source.
Besides AAI, SpiceJet has to pay dues to private airport operators Delhi International Airport Ltd, Mumbai International Airport Ltd and Bengaluru International Airport Ltd too.
And these are only mounting. “It has started delaying payment of aircraft lease rentals to lessors due to paucity of working capital,” said a source.
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