WL Ross, GS invest $100m in Indian airline

The agreed financing for SpiceJet exceeds last month’s financing arrangement with distressed specialist WL Ross by 25 percent. The new deal includes ‘participation’ by Dubai-based Istithmar World and SpiceJet director Ajay Singh and a subscription for equity warrants by Goldman Sachs.

An agreed transaction led by distressed investment shop WL Ross will make up to $100 million (€67 million) available to SpiceJet, an Indian budget airline listed on the Bombay Stock Exchange.

The capital made available to SpiceJet is greater than the $80 million originally agreed by WL Ross in July. The increased financing was partly due to the participation of Dubai government-backed Istithmar World Capital and SpiceJet director Ajay Singh, WL Ross said in a statement.

Goldman Sachs has also agreed to subscribe for equity warrants valued at $20 million.

“The financing is intended to give SpiceJet the staying power to get through the industry consolidation that is currently underway,” said WL Ross chief executive Wilbur Ross in a statement.

Ross had not responded to requests for comment at press time.

The capital infusion will occur in two tranches; the first is expected to be fulfilled within two weeks and the second will occur following shareholder approval.

Resulting ownership of SpiceJet following the transaction was not detailed in the statement.

With a 10 percent market share, SpiceJet is currently India’s second largest budget airline. It has a fleet of 15 aircraft and operates 94 flights in the country daily.

The investment is WL Ross’ second in India, following its acquisition in 2006 of OCM India, a worsted textile manufacturer, for approximately $37 million.

In India, the firm is based out of Mumbai, where it opened an office in May 2006. WL Ross has an agreement with India’s Housing Development Finance Corporation, which assists it in sourcing and evaluating private equity opportunities in the country.

WL Ross manages assets of approximately $7.9 billion and closed its fourth fund on $4 billion in January. The firm was acquired by asset management firm Invesco in July 2006 for $375 million.

A number of other private equity firms have made recent investments in the aviation sector. Washington-DC based Perseus last month agreed to supply $75 million in debtor-in-possession financing and extended a $100 million equity commitment for bankrupt US airline Frontier Airlines. In June, distressed debt specialist MatlinPatterson purchased 85 percent of Arrow Air.

Some airline investments have ended in bankruptcy as the sector struggles amid skyrocketing fuel prices. The Yucaipa Companies-owned Aloha Airgroup shut down its passenger operations in April after the airline filed for bankruptcy for the second time sine 2004. The same month, MatlinPatterson-controlled ATA Airlines filed for Chapter 11 bankruptcy protection and terminated all passenger operations.