Air India Assets Holding Ltd, a special purpose vehicle created by the government to park about half of the airline’s debt, plans to raise about ₹8,064 crore through a government-guaranteed bond issue this week, said a senior airline official.
Proceeds of the issue will be used to repay a portion of the airline’s debt, said the official, who asked not to be named.
The fundraise is part of Air India’s plans to shift ₹29,464 crore debt from its balance sheet to AIAHL. Once the debt is transferred, AIAHL will be liable for repayment. The official said the bond issue and subsequent transfer of debt to the SPV would reduce Air India’s monthly interest expenses by about ₹2,600 crore from 1 November.
“Air India’s monthly interest outgo will come down to about ₹1,400 crore from 1 November 2019. This will give the airline more fiscal room to clear its existing dues,” said the official cited above.
The sovereign guarantee may help AIAHL get a good response to the bond issue as the government would be a secondary guarantor in case of any default.
AIAHL, which was set up in February, has so far raised about ₹14,000 crore through government-guaranteed bonds, the official said. Air India has also transferred about ₹7,400 crore raised through non-convertible debentures in 2012 to AIAHL through the novation process. Novation is the act of substituting a valid contract with a replacement contract, where all parties concerned mutually agree to make the switch.
Air India’s net debt swelled from about ₹55,000 crore at the end of March 2018 to ₹58,351.93 crore at the end of March 2019. This includes working capital and aircraft-related debt. With the transfer of ₹29,464 crore debt from its balance sheet to AIAHL, Air India will retain ₹29,000-30,000 crore debt, the bulk of which is backed by assets, including the national carrier’s fleet.
Source: Mint