Thursday, April 25, 2019

Air India SPV approaches banks seeking lower interest rates on loans: Report

THE government's special purpose vehicle Air India Assets Holding (AIAHL) will soon ask banks to slash interest rates, from 10.5-11 percent at present to nearly 8.5 percent, on the Rs 29,464-crore working capital debt of Air India that it took over.
The loan of Air India was shifted to the SPV back in 2018 to make the airline attractive to potential buyers during the airline's divestment process. An official source told The Financial Express on condition of anonymity that AIAHL will negotiate...
restructuring and refinancing of the debt.
If this is approved, AIAHL will be free of interest burden of nearly Rs 300-400 crore per year, as nearly Rs 15,000 crore of the expensive debt would be recast. It is unclear whether this would be approved as banks, which includes the State Bank of India, are not obligated to cut the rates.
Air India Assets Holding (AIAHL), which was formed to take away the airline’s outstanding working-capital loans, will issue the NCDs which will come with sovereign guarantees.
The decision will largely depend on the banks' management and the central government's persuasion.
On February 28, the Cabinet approved the transfer of Air India's accumulated working capital loan over to AIAHL without the backing of any asset, as a part of the strategic divestment process of the state-run airline. The airline's non-core assets like artefacts and paintings were also kept with the AIAHL, and the entity has a mandate to monetise them. Air India's total debt is reportedly at Rs 55,308 crore.
The SPV was incorporated in January 2018. The CMD, Air India and its director of finance, along with joint secretaries of departments of civil aviation, expenditure, economic and DIPAM are on board of AIAHL.
The government also allocated nearly Rs 2,600 crore to service the loan in AIAHL during the interim budget for 2019-20. The carrier's non-core assets, which are worth nearly Rs 5,000 crore, will also be used to pare the debt. The funds from the sale of Air India and Air India Express, when it happens, will be used for the same loan.
The disinvestment process of the airline will be resumed once a fresh government is seated after the elections in May. The process was called off in June 2018 when the Centre could not find any takers for the airline.
A Turnaround Plan (TAP) as well as a Financial Restructuring Plan (FRP) were approved for Air India by the previous UPA regime in 2012.
Under these plans, the airline is to get budgetary support amounting to Rs. 30,231 crore over a ten-year period and also equity support for the payment of principal/ interest of the non-convertible debentures.
The government is eyeing around Rs 7,000 crore from the sale of national carrier Air India in the next financial year, a government official had earlier said.
The government will initiate the process of strategic disinvestment of Air India in the second half of 2019-20 and in between it would work towards selling some of its subsidiaries and monetise assets.
In November last year, a ministerial panel headed by finance minister Arun Jaitley had approved transferring Rs 29,000 crore debt to a special purpose vehicle (SPV)-- Air India Asset Holding Company.
After a botched attempt to sell Air India in May last year, the Jaitley-led panel in June decided to scrap the stake sale plan for the time being. It was decided to infuse more funds into the carrier and cut down debt by raising resources by selling land assets and other subsidiaries.

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