New Delhi: The money will be used to refinance loans taken to purchase seven Boeing 787 aircraft. According to the tender document, the company has asked banks to submit their bids by November 20, indicating the principal amount they are willing to offer. The bank with the lowest all-inclusive interest rate” will be shortlisted first.
The rate of interest will be linked to MCLR (marginal cost of fund-based lending rate) instead of base rate with reasonable spread as margin. MCLR is lower than the base rate of a bank, as it calculates interest on a marginal cost of funds, rather than average cost of funds.
This is the first time Air India is approaching lenders to raise money since the coronavirus pandemic struck the aviation sector which has forced the government to delay the airline’s privatisation process four times by now. On October 29, the bidding parameters were relaxed to allow bidders to quote enterprise value instead of equity value and extended the deadline to 14 December.
Civil Aviation Minister Hardeep Singh Puri said this will entice bidders who till now had constructed the debt amount as a minimum threshold bid amount.
With finances stretched, the government refused to infuse cash into the airline forcing it to miss payment to creditors like lessors, airports.
At the end of 30 September, the national carrier owes about Rs 2,258.27 crore in dues to the Airport Authority of India- highest among all airlines.
Government agreeing to provide sovereign guarantee, this shows an intention to operate the airline as a going concern till disinvestment is done, the official said.
As part of a turnaround plan, Air India has received almost Rs 31,000 crore as equity infusion since FY 12, but it has failed to improve the financial condition of the airline.
“Air India had sought around Rs 500 crore as equity support to fill up for losses induced by the pandemic but that request has been rejected as the government is not in a position to offer equity support because its expenses have increased in order to provide food, additional health infrastructure due to COVID. However, since the privatisation process has been delayed, it was decided to provide sovereign guarantees, so that the airline can raise short term loans for working capital and other payments,” a senior government official said.
11/11/20 Arindam Majumder/Business Standard
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