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Marans paying Rs 400 crore to get rid of SpiceJet?

As per an agreement with Ajay Singh, Marans were to infuse Rs 400 cr in the airline; however, the funds are stuck as a signing authority is under CBI arrest

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Budget airline SpiceJet Ltd is in dire need of funds, but all resource taps seem to have been turned off.

Sources, who did not want to be named, said in the latest development, the crisis-ridden carrier is finding it difficult to get funds that were to come from promoter Kalanithi Maran because of the recent arrest of Sun Group officials by the Central Bureau of Investigation (CBI). One of the arrested executives is a signing authority for all financial transactions at SpiceJet.

The fund from Maran is being sought as haircut by co-founder of SpiceJet Ltd Ajay Singh as agreed upon in a pact, which was done for in-principle transfer of ownership of the airline to the later.

Haircut is a percentage that is subtracted from the market value of an asset that is being used as collateral.

It is, however, not clear why Marans need to infuse the money in the airline.

In the revival plan submitted to civil aviation ministry, Singh has committed to infuse Rs 100 crore by January 25 and another Rs 300 crore by February 25. This money is expected to flow in the airline through haircut amount of Rs 400 crore paid by Maran.

However, getting this amount from Maran is proving to be a daunting task.

The source said the Rs 100 crore that was to be brought in by January 25 has not yet come in. On Wednesday, Singh was in Chennai, where the Marans are based, to work out a solution to the engulfing crisis. He is looking to collect the remaining Rs 300 crore haircut amount from Maran to tackle the snowballing problem with lessor Bank of China Aviation (BoCA), who want to possess 11 aircraft due to mounting dues.

"The tranches of haircut (first Rs 100 crore and then Rs 300 crore) has to come from the Marans but they (funds) cannot be brought in because of the CBI arrest one of the signing authorities," said the source.

Another source, who also spoke on condition of anonymity, confirmed that the signing authority has been arrested by the CBI but said that will not stop the funds from being infused into the airline.

"If he (the signing authority) goes, someone else will come in. There are always two or three signing authorities," he said.

In the meantime, Singh, who had jumped in as a white knight to save beleaguered airline, is fighting troubles of gigantic proportion with creditors hounding him at every bend. The airline owes money to Airports Authority of India (AAI), oil marketing companies (OMCs), aircraft lessors and other vendors and suppliers.

Singh has been negotiating with all of them for extension credit period till investors pump in money. Recently, he rushed to Singapore to assuage aircraft lessor Bank of China Aviation's (BoCA) fear on pending dues but could not make much headway in convincing them not to take back planes.

"His (Singh's) meeting with the lessors was not so encouraging, while the Singapore officials are co-operating, the managers in India are acting difficult," said one of the sources.

In all this, Singh's losing his patience. According to a source, he had a minor tiff with M Sathiyavati, the current chief of the Director General of Civil Aviation (DGCA), over the lessor issue.

Sathiyavati has said the aviation regulatory body was constraint by the Cape Town Convention pact, of which India is one of the signatories, and would have to adhere the lessor's demand.

An industry official said these were "standard challenges of an airline" and Singh must have known them when must have decided to rescue SpiceJet.

"Creditors (lessors, AAI, OMCs and others) do this (arm twist) to be top recall when the cash is brought in. So that they get paid first among all creditors," he said.

Another source, closely associated with revival of the no-frill airline, said the probability of the Singh backing out at this stage is very low. In the same breath, however, he added; "but you can never say never".

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