AI raises $1.4 bn at sub-Libor rates to fund aircraft deal

Mumbai: Air India has just concluded an aircraft financing deal to raise $1.4 billion (about Rs 5,600 crore) at a rate below the Libor (London inter-bank offered rate). The deal has been clinched through two special purpose vehicles set up in the United States and Ireland to benefit from lower tax rates.
Most commercial transactions globally are at rates above the Libor — even major Indian banks have recently borrowed from US banks at rates much above the Libor. Air India has benefited from dealing with the US Ex-Im, which offers finer rates for Boeing customers.
Unlike its last transaction when Air India borrowed $500 million to buy four aircraft, the airline major has also managed to obtain a sovereign guarantee from the government. The guarantee has come at a cost, as a fee of 0.5% per annum is being paid to the government of India.
Of the total amount raised, the US Ex-Im has guaranteed about $1.2 billion, and $200 million has been raised on commercial borrowings from the State Bank of India and ICICI. The commercial part has been raised at rates above the Libor, it is learnt.
15/10/07 Cuckoo Paul/Economic Times

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