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Air India to raise a short term loan of 6,150 crore

Air India has current liabilities and provisions including short term loans and trade payables of  ₹70,686.6 crore (MINT_PRINT)Premium
Air India has current liabilities and provisions including short term loans and trade payables of 70,686.6 crore (MINT_PRINT)

  • Proceeds of the loan, would be utilized to refinance foreign currency bridge loans taken to purchase seven Boeing 787 and 777 aircraft
  • Air India's endeavour to raise money from the banks comes amidst a proposed divestment plan of the government's stake in the airline company

New Delhi: Debt-laden Air India Limited plans to raise 6,150 crore through a short-term loan (STL) from domestic lenders by the end of this month, the airline said in a tender document on Wednesday.

Proceeds of the loan, which would carry a sovereign guarantee, would be utilized to refinance foreign currency bridge loans taken to purchase seven Boeing 787 and 777 aircraft.

The national carrier is also offering aircraft like Boeing 787 and Boeing 777 as collaterals for the loan, which will be repaid in a year.

According to the bid document, Air India will raise the total amount in seven tranches, which would consist of tree tranches of 790 crore each, three tranches of 925 crore each, and one tranche of 1,005 crore.

The interest rate payable by the national carrier will be linked to 'MCLR/GSEC rates with reasonable spread as margin'.

Marginal Cost of Funds Based Lending Rate or MCLR is a tenor-linked internal benchmark, which means the rate is determined internally by the bank depending on the period left for the repayment of a loan. Typically, banks cannot lend at a rate lower than MCLR of a particular maturity, for all loans linked to that benchmark.

A copy of the bid document has been reviewed by Mint.

Air India's endeavour to raise money from the banks comes amidst a proposed divestment plan of the government's stake in the airline company amidst a pandemic that has crippled the aviation and travel sectors.

The government had last month revamped the terms for selling the distressed national carrier, shelving the earlier offer of the company along with a fixed level of debt. As per the new offer, Air India will be offered on its enterprise value and bidders can quote the level of debt they are comfortable with.

Air India has current liabilities and provisions including short term loans and trade payables of 70,686.6 crore and a net debt of 58, 255 crore at the end of FY 19. However, the government has transferred 29,464 crore of this debt from Air India to a government-owned special purpose vehicle called Air India Assets Holding Company Limited (AIAHL).

The government has however turned down the national carrier's request for equity infusion, instead agreeing to stand as a sovereign guarantor for the airline's debt.

So far, Air India has received an equity infusion of 30,520.21 crore till date from the government since FY 2011-12, which includes financial support and cash support.

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