After a long wait, the finance ministry has approved unconditional sovereign guarantee for Air India’s Rs 7,400 crore non-convertible debenture (NCD) issue. The airline now plans to close the issue in a three weeks and return the money to its lenders.
“It will take us around three weeks from now on to complete the bond issue and return the money to the banks to clear a part of our short-term debt. Returning money to the banks will bring down bank’s exposure to the airline and reduce our interest burden on the loans by around 2 per cent,” said a senior Air India official.
He explained that they will start the process by asking credit rating agencies to rate the bond issue and then the merchant bankers will be invited to submit their bids. “We have approached the EPFO, Provident fund trustees and LIC to subscribe to these bonds,” he said.
This bond issue is a part of the financial restructuring plan of the airline’s short-term debt of around Rs 18,000 crore. Around Rs 10,600 crore has been converted into long-term with a repayment period of 10-15 years and the rest was to be returned to banks through the bond issue.
The plan mandated Air India to complete the bond issue by September 30. It was waiting for the finance ministry to provide sovereign guarantee to the bond issue.