Air India scouts for merchant bankers to issue NCDS

by   Jul 13, 2012 18:39 IST

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New Delhi: Air India invited offers for appointment of merchant bankers for issuing government-guaranteed bonds to the tune of Rs 7,400 crore to raise resources, airline sources said today.

The move to issue non-convertible debentures (NCDs) is part of the cash-strapped national carrier's financial restructuring plan (FRP) and the turnaround plan (TAP) which were approved by the Cabinet Committee on Economic Affairs in April.

Raising money. PTI

The NCDs, which would be issued to banks and financial institutions to repay part of the working capital loans, are expected to have a maturity period of 19 years, the sources said, adding that the bids would have to be submitted by 6 August.

The airline aims at getting the NCDs placed and subscribed by 30 September, they said, adding the government guarantee would make the return on NCDs legally valid and binding even in the event Air India going insolvent.

A suitable structured payment mechanism would be designed for timely payment of interest and repayment of principal, while the interest on the NCDs would be serviced by the company out of the equity infusion by government as part of the FRP, the sources said.

FRP envisages retirement of Air India's short-term loans through the proceeds of the NCDs, they said, adding it aims to convert Rs 18,500 crore of the short-term debt into long-term borrowings.

Global rating agency Fitch had earlier affirmed 'AAA' rating, indicating lowest credit risk, to Air India's Rs 700 crore worth of NCDs which were issued in March this year for a period of 10 years, the sources said.

PTI