Mumbai: National flag carrier Air India Ltd has sold its Rs.7,400 crore worth of non-convertible debentures (NCDs) to state-run entities Life Insurance Corporation of India (LIC) and the Employee Provident Fund Organisation (EPFO), entirely bypassing the market.
An Air India executive, requesting anonymity, said LIC subscribed to bonds worth Rs.3,000 crore and EPFO to the remaining.
“The transaction would be over by middle of December. This is the best deal for Air India as we would use this proceeds to retire a good part of short-term working capital loans taken from 19 different banks,” he added.
On 6 November, India Ratings and Research Pvt. Ltd said it had assigned Air India’s NCD issue an “AAA” rating, reflecting the unconditional guarantee extended by the government of India (GoI) for the timely repayment of principal and interest on the NCDs.
“The proceeds of this NCD issue will be used to repay outstanding Rs.73,91.67 crore short-term bank loans, interest thereon, as well as expenses in relation to the issue of the debentures and GoI guarantee fee as may be applicable,” India Ratings said in a statement.
The NCDs were issued early this month and have a tenor of 19 years, with principal redemption in five equal instalments starting from the 15th year and interest payments being made biannually, it added.
The NCD issue is a part of the government’s restructuring plan for reviving the airline. The Cabinet Committee on Economic Affairs on 12 April approved Air India’s financial restructuring plan, which included the issuance of the NCDs.