Air India to raise Rs 5 bn in short-term loans, to mop up another Rs 61 bn

Debt-ridden Air India has revived its plans to raise Rs 5 billion in short-term loans (STLs) besides mopping up another Rs 61 billion by way of sale and leaseback of seven of its wide-body planes, including six Boeing 787 (Dreamliner) aircraft, an airline official said.

In early September, the airline had invited bids for raising Rs 5 billion through STL to meet its working capital requirements with September 10 as the deadline for submission of bids.

However, the deadline was extended to October 31 after it failed to get any response.

At the same time, Air India managed to get Rs 10 billion from the National Small Savings Fund (NSSF) as loan and subsequently the plan to raise Rs 5 billion was put on hold.

"We did not pursue the proposal to garner Rs 5 billion in STL after receiving Rs 10 billion from the NSSF. We have now decided to resume the process once again," said a senior Air India official.

Sitting on a debt pile of Rs 550 billion, which include Rs 350 billion towards working capital loans, the carrier has been struggling to raise funds since last year.

Meanwhile, it last week came out with an invitation of offers for sale and leaseback (SLB) of seven planes - six B787-800 and one B77-300 ER - to raise as much as $856 million (around Rs 61 billion) for repayment of the bridge finance against these planes.

Besides 12 B777s, Air India has 27 B787-800s in its fleet. Of these, 21 Dreamliners are already operating under the SLB mode.

Under the SLB arrangement, the seller of an asset leases it back from the purchaser for a longterm period and continues to use it without actually owning it.

"AI would sell the aircraft to the lessor and immediately lease the same back under operating lease for a period of up to 12 months with an option to extend by three more years at a mutually negotiated price," as per the bid document.

The SLB transaction will be supported by the Government of India guarantee in favour of the bank/ institution/lessor, according to the document.

The last date for submission of technical and financial bids is December 10, it said.

As part of its fleet expansion plan, the national carrier had in 2005 placed orders with Boeing for 68 aircraft

27 Dreamliners, 15 B777300ERs, eight B777200LRs and 18 B737800s. All these aircraft have already been delivered to the carrier.

The carrier is staying afloat on a bailout package extended by the government in 2012, as part of a turnaround plan and a financial restructuring plan. Air India is to receive a budgetary support of Rs 302.31 billion over a 10-year period ending March 2021.

In June also, Air India borrowed short-term loans worth Rs 10 billion to pay staff salaries and meet other obligations, following a failed privatisation attempt.