SpiceJet Ltd. witnessed a remarkable 6% increase in its share price on Monday, reaching an intraday high of ₹67.9. This surge reflects positive investor sentiment following the airline's announcement of a significant debt restructuring deal.

The agreement with Carlyle Aviation, a prominent lessor, includes several crucial components aimed at alleviating SpiceJet's financial burden. Specifically, the deal involves a write-off of $40.17 million in lease arrears, the conversion of $30 million of lease dues into equity at ₹100 per share, and the transformation of another $20 million into compulsorily convertible debentures (CCDs) of its cargo arm, SpiceXpress & Logistics Private Limited.

This strategic move is expected to delever SpiceJet’s balance sheet substantially by reducing outstanding arrears and converting significant portions of debt into equity and debentures. According to a statement from SpiceJet, "The transaction will partially restructure the outstanding arrears due to the lessors, thereby deleveraging the company’s balance sheet."

This latest deal is Carlyle Aviation’s second such agreement with SpiceJet. In August 2023, Carlyle had already converted $28 million in dues into a 5.9% stake in the airline. The continued support from Carlyle highlights the ongoing efforts by SpiceJet to stabilize and restructure its financial obligations.

In addition to the debt restructuring, SpiceJet has outlined plans to raise ₹3,200 crore through a Qualified Institutional Placement (QIP). The funds are intended for settling liabilities, reviving grounded aircraft, and expanding the airline's fleet. SpiceJet’s promoter, Ajay Singh, is reportedly contemplating reducing his stake by up to 15%, down from his current 47.66% ownership, depending on market conditions.

The recent developments come at a critical juncture for SpiceJet as it strives to address its financial challenges and revitalize its operations. The company has experienced a nearly 60% gain in share price over the past year, driven by similar restructuring announcements.

As of the June 2024 quarter, SpiceJet had lease obligations amounting to $137.68 million. With the recent settlement, this will be reduced to $97.51 million, offering the airline significant relief and contributing to its ongoing financial recovery.

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