Air India bond sale bid deadline off

Sep 13 2012, 17:34 IST
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The company will now set a new deadline on September 20.   (Reuters) The company will now set a new deadline on September 20. (Reuters)
Summary$1.3 bn sale: Delay may mean carrier will miss a Sept 30 restructuring plan deadline.

Troubled national carrier Air India (AI) headed by Civil Aviation Minister Ajit Singh has postponed for the third time the deadline for submission of bids for its jumbo Rs 74 bn ($1.3 bn) 19-year bond sale.

Originally, bids were to be submitted by August 6 but this was pushed back to August 31. The company will now set a new deadline on September 20.

The delays may mean that the carrier will miss a September 30 deadline set under the its financial restructuring plan to complete the bond sale. The restructuring plan was approved by the government earlier this year to revive the sagging airline which has not posted a net profit for the last five years.

The bond sale is significant as it will not only help achieve a milestone for Air India in its restructuring process, but will also reflect the depth of the Indian corporate bond market.

Bankers reckon that the bond issue is doable given the fact that the bonds will carry a government guarantee - but to what extent the appetite will impact the pricing remains to be seen.

This is complicated by the government guarantee. Because of the guarantee, Air India's bonds will have to meet the government cap of 60bp above the corresponding tenor G-Sec.

The carrier has also capped the pricing at 9.50% for the bonds. Proceeds from the bond sale will be used to retire short-term loans. SBI Caps is the joint arranger.

The postponements of the bid submissions are being blamed on the delay in getting the federal guarantee for the bond, and that is making market participants nervous.

We already don't have much faith in the airline's business acumen, so it is the guarantee part which is forcing us to have a look at the bonds, said a buyside investor.

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