NEW DELHI : Lenders to Air India Ltd are set for major relief as Air India Assets Holding Ltd (AIAHL) is expected to repay ₹22,000 crore of its ₹29,464 crore of its working capital debt next month, a move that will also sharply lower the interest obligations of the national carrier, said two people with direct knowledge of the matter.

AIAHL, a special purpose vehicle (SPV) created to warehouse the debt of Air India, will raise the money through a government-guaranteed bond issue, said one of the persons mentioned above, requesting anonymity.

The proceeds of the bond will be used to retire working capital debt parked in the SPV, the person said.

The rupee-denominated bond issue and the subsequent repayment of the working capital debt will nearly halve the interest servicing outgo for Air India from ₹4,500-5,000 crore a year to about ₹2,700 crore a year, said the other person, who also did not want to be named.

Air India’s lenders include state-run banks such as Allahabad Bank, Andhra Bank, State Bank of India, United Bank of India, UCO Bank, Union Bank of India, and Punjab National Bank, and private lenders such as Deutsche Bank, Standard Chartered and JPMorgan.

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. Aircraft debt makes up the difference between total debt and the working capital debt of ₹29,464 crore.

Air India is expected to have incurred a loss of ₹7,365 crore in the year ended 31 March 2019, compared to the ₹5,337 crore loss it reported in the previous year, according to provisional figures issued by the government in June.

The losses can be attributed to a weak rupee, higher fuel prices and the high-interest rate burden on its debt, said the second person mentioned above.

“Air India will become more efficient if its net debt is reduced by about half as this will leave more cash in the airline’s hands to spend," the person said.

Air India, which has about 128 aircraft, began operations on 13 new domestic routes and six international ones in the last fiscal.

The cash-strapped airline, which is surviving on government bailout, has received an equity infusion of ₹30,520.21 crore from the government so far as a part of the 2012 Turn Around Plan (TAP).

AIAHL was set up by the government in February 2019 to park accumulated working capital loans not backed by any asset along with four subsidiaries of the airline, Air India Air Transport Services Ltd (AIATSL), Airline Allied Services Ltd (AASL), Air India Engineering Services Ltd. (AIESL), and Hotel Corporation of India Ltd (HCI), non-core assets, painting and artefacts and other non-operational assets of Air India Ltd.

As of now, only one subsidiary of Air India, namely AIATSL, has been transferred to AIAHL, in line with the share purchase agreement between Air India Ltd and AIAHL subject to conditions which include the approval of lenders.

Subscribe to Mint Newsletters * Enter a valid email * Thank you for subscribing to our newsletter.

Share Via