Air India awaits guarantee nod for bond issue

Debt-laden national carrier Air India's much-delayed Rs7,400-crore bond issue is likely soon, as the much delayed nod from the finance ministry to back the fund-raising exercise with an unconditional government guarantee is expected within a fortnight, The Economic Times reported citing sources.

Air India is reeling under a huge debt burden of over Rs43,000 crore, a mix of long-term debt and working capital loans, and is therefore banking heavily on this bond sale backed by sovereign guarantees to ease the interest cost on the expensive working capital loans.

The finance ministry had put these plans on the dock when it said that Air India would get only 'conditional guarantees' that too based on achievement of specified parameters.

"An unconditional guarantee is a serious issue and the finance ministry will take its time. But, as we understand, the finance ministry is likely to come around on the issue as the cabinet has already cleared it," ET quoted Rohit Nandan, Air India chairman and managing director, as saying.

For the national airline the bond sale also becomes important as from 1 October some of the loan recoveries will start which were minimal till this period as the airline was under the financial restructuring plan (FRP).

In the coming months, Air India will pay Rs100 crore every month as interest cost. "We were under the FRP and that is the reason we were getting away with just Rs25-30 crore payments per month but now the recoveries will start," Nandan said.