Air India SPV gets waiver on sovereign guarantee clause

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New Delhi | Published: August 8, 2019 3:18:33 AM

AIAHL, which houses `29,464 crore of the national carrier’s debt, is looking to raise around `22,000 crore through government-backed and government-serviced bonds

Air India sale, Air India budget, jet airways, Air India buyer, Air India Asset Holding, AIAHL, Food Corporation of India, Air India debt, Air India total debt, Air India bailout, Air India rating, Air India Icra, Airline Allied Services and Hotel Corporation of India, finance minister Nirmala Sitharaman, Nirmala Sitharaman budget, Nirmala Sitharaman budget speech

Air India sale, Air India budget, jet airways, Air India buyer, Air India Asset Holding, AIAHL, Food Corporation of India, Air India debt, Air India total debt, Air India bailout, Air India rating, Air India Icra, Airline Allied Services and Hotel Corporation of India, finance minister Nirmala Sitharaman, Nirmala Sitharaman budget, Nirmala Sitharaman budget speech The government transferred Air India’s debt worth `29,464 crore, along with its non-core assets including land into AIAHL, to reduce the interest burden of the airline and improve its balance sheet before the disinvestment.

In a bid to check high borrowing costs for Air India Asset Holding (AIAHL), the government has exempted the special purpose vehicle from a clause that makes sovereign guarantee on government bonds non-transferable in case of change of ownership of the company.

AIAHL, which houses `29,464 crore of the national carrier’s debt, is looking to raise around `22,000 crore through government-backed and government-serviced bonds.

A senior government official said the ministry of finance waived off the condition as it would have increased the cost of borrowing on government-guaranteed bonds. Under this condition, the sovereign guarantee ceases to exist if the ownership of the entity is changed.

Recently, Food Corporation of India (FCI) was extended a similar exemption after its `8,000-crore bond issue in February evoked a poor response. While the food procurement agency could only raise one-third of the proposed amount, the coupon rate was also higher than the benchmark rates.

“To avoid a similar situation, the same exemption will be granted to bonds floated by AIAHL,” the official said. Rating agency Icra has graded the proposed bonds a triple-A with ‘stable’ outlook. The government transferred Air India’s debt worth `29,464 crore, along with its non-core assets including land into AIAHL, to reduce the interest burden of the airline and improve its balance sheet before the disinvestment. The non-core assets include Air India Air Transport Services, Air India Engineering Services, Airline Allied Services and Hotel Corporation of India. Air India reported a loss of `7,635 crore in FY19 and had a total debt of `58,351 crore at the end of March 2019.

In the Budget speech for 2019-20, finance minister Nirmala Sitharaman said the government is committed to sell Air India. There were no buyers for the government’s 76% stake in Air India when the deadline for bids expired on May 31, 2018.

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