Air India is likely to raise ₹7,000 crore in a bond sale, the first in a series to repay a portion of the national carrier’s loans, said two people with direct knowledge of the matter. The bonds will be floated by Air India Asset Holdings Ltd, the special purpose vehicle that has taken on ₹29,464 crore of Air India’s debt.
Refinancing Air India’s high cost debt could make the airline palatable for potential investors as the government plans to start the process for the sale of Air India by October. There were no bidders when the government attempted to sell the airline with all its debt in May last year.
Air India had total debt of ₹55,000 crore and the reduction by ₹29,464 crore cut the carrier’s annual interest liabilities by about ₹2,700 crore. The plan is to raise over ₹22,000 crore, including the ₹7,000 crore, in two tranches.
According to the plan, Air India Asset Holdings will first issue three-year papers, which could yield anything between 7 per cent and 7.25 per cent, dealers said.
Rating company ICRA has graded the proposed bonds a triple-A with stable outlook. Air India Asset Holdings is obtaining another rating.
“The assigned rating factors in the obligation of the Government of India (GoI) towards the ₹7,000-crore proposed NCD programme of AIAHL as per the letter of authorisation (LoA) dated June 18,” ICRA said in a note last week. “As per the LoA, the repayment of principal and the interest payment for the captioned NCD programme/GoI fully serviced bonds shall be met by GoI, by making suitable provisions in the budget of the Ministry of Civil Aviation.”
The rating assumes that all of Air India Asset Holdings’ debt shall be in the nature of government fully serviced bonds or backed by explicit government guarantee. The bonds may open for subscription on electronic bidding platforms on stock exchanges this week.
The second set of bonds is likely to come up next month. Air India Asset Holdings will raise ₹15,064 crore through the bonds guaranteed by the government. Such papers are expected to have a 10-year maturity.
Source: Economic Times