Air India looks to raise $30m from domestic lenders to refinance its debt

Photographer: Dhiraj Singh/Bloomberg

National carrier Air India Ltd plans to raise up to 225 crore through a short-term loan from domestic lenders by 31 January to refinance an earlier loan, the airline said in a tender document on Monday. The loan will carry a sovereign guarantee and lenders will have to submit their bids by 27 January.

Proceeds of the loan, whose tenure is a year, will be utilized for refinancing earlier loans, and the airline will offer 18 of its aircraft as security, according to the document, a copy of which was reviewed by Mint.

The development comes amid the Centre’s plans to privatize the airline. The government is selling its 100% stake in Air India, which has incurred losses since 2007. Tata Group and an employee group headed by a board member are among the entities that have put in preliminary bids for the airline.

However, the stake sale process got delayed because of the covid-19 pandemic and is now likely to be concluded only in the next fiscal.

A senior official at the airline said it is raising capital from the market in the absence of any fund infusion from the government. “The government has stopped infusing funds into the airline but will stand as a guarantor for the loans. The latest round of funds raised from the banks will be used to refinance an earlier loan of the same amount,” the official said requesting anonymity.

Indian airlines, including Air India, are set to post net losses of around 21,000 crore during the fiscal year 2021 following travel restrictions and diminishing travel appetite because of the covid-19 pandemic. They will require 37,000 crore in additional funding from FY2021 to FY2023 to recover from losses and debt, credit rating agency ICRA Limited said in a recent report.

The overall airline industry debt is expected to rise to about 50,000 crore, excluding lease liabilities by FY 2022, ICRA said in the report.

Air India’s net debt is more than 60,000 crore at present. The airline has been facing working capital shortage and owes money to various vendors including OMCs, which is being financed by raising loans from various banks. The airline has delayed paying salaries to its employees against the backdrop of its mounting debt obligations.

The article was first published on livemint.com

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

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  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.