Air India board to meet on Monday to finalise prepayment of Rs 12k-cr debt

Loans were raised by the airline as NCDs at 9.05-10.05% interest rate, will be prepaid as part of govt's sale of airline to Tatas

The board of directors of Air India is meeting on Monday to finalise a plan to prepay debt worth Rs 12,900 crore to the lenders. The loans were raised by the airline as non-convertible debentures and will be prepaid as part of the government's sale of the airline to the Tata group.

A banking source said the airline was paying very high interest of 9.05-10.05 per cent on the NCDs. As per the plan, the NCDs are expected to be prepaid by the Indian government through Air India Asset Holdings Pvt Ltd (AIAHL) before the Tatas takes over the airline next month.  

Air India had debt of Rs 62,361 crore as on March 2020.  Of this, Air India will be transferring debt worth Rs 46,262 crore to the government-owned entity, AIAHL. The Tata group had agreed to take over Air India at an enterprise valuation of Rs 18,000 crore. Of this, the Tata group will take over Air India's debt worth Rs 15,300 crore and pay Rs 2,700 crore to the Indian government.  

Bankers said Tata Sons, which has the highest credit rating, will be able to refinance Air India's residual loans worth Rs 15,300 crore at a far lower rate, bankers said. "The lower finance cost will help the Tata group to turnaround the airline faster. The group used the same strategy in Bhushan Steel," a banking source said.

An email sent to Air India did not elicit any response. A Tata spokesperson declined to comment.

In an extraordinary general meeting of the shareholders held on October 26th, the shareholders had approved the transfer Air India’s four subsidiaries -- AI Airport Services (AIASL), Alliance Air Aviation (AAAL), AI Engineering Services (AIESL), and Hotel Corporation of India (HCI ) to Air India Assets Holding (AIAHL) at book value to AIAHL. The effective date of transfer of investments along with the receivables would be mutually decided between Air India and AIAHL.

Air India will be filing a petition with the National Company Law Tribunal seeking its approval for the demerger of its subsidiaries and transfer of debt.

Air India debt plan

• Rs 46,262 cr: Debt to be transferred to AIAHL

• Rs 15,300 cr: Debt to be serviced by Tata Sons

• Rs 2,700 cr:   Cash to be paid by Tata to GoI for acquisition