Air India SPV to raise ?8,064 crore by bond issue this week


New Delhi: Air India Assets Holding Ltd (AIAHL), a special purpose vehicle created by the government to park part of Air India’s debt, will raise about ?8,064 crore through a government-guaranteed bond issue over the course of the week. The proceeds from the bond issue will be used to retire a portion of debt from the airline’s books, a senior official of the airline said.

This is part of the airline’s plans to transfer ?29,464 crore debt from its balance sheet to the special purpose vehicle — AIAHL. Following the transfer of the debt, AIAHL will be liable for debt repayment.

So far, AIAHL has raised about ?14,000 crore through government-guaranteed bond issues, the senior official said.

Separately, Air India has also transferred about ?7,400 crore it secured through NCDs (non-convertible debenture) during 2012 to AIAHL through the process of novation.

Novation is the act of substituting a valid existing contract with a replacement contract, where all concerned parties mutually agree to make the switch.

Air India’s net debt swelled from about ?55,000 crore at the end of March 2018 to ?58,351.93 crore at the end of March 2019. It includes working capital and aircraft-related debt.

To reduce Air India’s debt burden, the government established AIAHL in February to park a part of the airline’s debt not backed by any asset, airline’s non-core assets and other non-operational assets of the airline. The government plans to monetize assets parked at AIAHL to pay off its liabilities.

With the transfer of ?29,464 crore debt from its balance sheet to AIAHL, the national carrier will be left with ?29,000-30,000 crore debt, a large portion of which is backed by assets, including the national carrier’s aircraft fleet.

Currently, only Air India Air Transport, of the company’s four subsidiaries, has been transferred to AIAHL as of now.

After the completion of the latest round of bond issuance by AIAHL, and subsequent transfer of debt into the SPV, by the end of this week, Air India’s interest servicing expense is expected to fall by about ?2,600 crore monthly, from 1 November, the official said.

“Air India’s monthly interest outgo will come down to about ?1,400 crore from 1 November 2019. This will give the airline more fiscal room to clear off its existing dues,” the official added.

Meanwhile, the government will soon invite bids to sell its entire stake in Air India, after potential buyers baulked at an initial attempt to divest a partial stake in the national carrier last year.

news Source:- livemint

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