No guarantee of AI's loan swap succeeding

New Delhi: Loss-making national carrier Air India’s effort to refinance its $1.5-billion loan has hit a snag, with banks refusing to offer cheaper funds without a 100% sovereign guarantee.
Air India had raised a $1.5 billion loan in July last to purchase 21 Airbus aircraft. The airline had agreed to pay 12% interest, despite a full sovereign guarantee and is now looking to replace it with a cheaper loan.
“Air India is looking for at least a 100 basis points cut in rates, but without a full sovereign guarantee it may find it difficult to raise fresh loans even at existing rate,” said a senior official of the state-run Punjab National Bank, who asked not to be named.
PNB is part of the consortium that extended the existing 12-year loan. Other members of the consortium of public sector banks are IDBI, Canara Bank and Union Bank of India.
The agreement had a provision allowing Air India to pay in advance this loan by September 2009, and raise a fresh loan at a lower rate. But now the aviation ministry is in no mood to offer a 100% guarantee and seems keen on discovering the rates that the airline can get with lower assurance.
22/07/10 Anindya & Dheeraj/Economic Times

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Categories: NACIL Jul 2010