Royal Airways Ltd, which plans to start a low cost carrier 'SpiceJet', is planning to raise $90 million through an issue of foreign currency convertible bonds in the international markets in June.
The company is raising the money for buying 20 Boeing 737-800 new generation aircraft with a list price of $1.2 billion.
"These funds will be used to partly fund the advance payment for the fleet acquisition plan," said Ajai Singh, director, Royal Airways.
The low cost carrier, which has placed an order for 10 airplanes, is expecting to start operations by mid-May.
The airline informed the Bombay Stock Exchange that the FCCBs issue would be in compliance with all legal requirements.
Royal Airways, which is currently listed on the BSE, is planning to issue the bonds either at the Luxembourg or Singapore stock exchanges.
"The board has approved the issue today and we will have to take shareholders approval, which will be in June. Subsequently, by the end of June, we will hit the market," Singh said.
Royal Airways had recently made preferential allotment of 1.53 million unsecured fully convertible debentures of Rs 100 each to IL&FS, which could be converted into 3.7 million shares of Rs 10 each.
The carrier plans to start operations by this summer and expects to be profitable by the second half of the first year of launch and become cash neutral in the second quarter of the first year.
Royal Holdings Services Limited, a Nevada-based Investment Company, has a major stake in Royal Airways Ltd. Foreign institutional investors, like Citigroup, ABN Amro and Goldman Saachs, currently hold over 10 per cent equity in the company.
Royal Airways was given a no objection certificate by the government in November last year to start operations. It is expected to follow a dynamic pricing model for its flights. As per this model, airfare on a particular flight are determined on the basis of the demand and availability of seats.
Royal plans to launch services in the busy and lucrative Delhi-Mumbai, Delhi-Bangalore, Delhi-Chennai and Delhi-Kolkata sectors. It also plans to operate in the non-metro sectors.
