Air India to sell Rs7,400 crore bonds to LIC, EPFO

Cash-strapped national flag carrier Air India is likely to place non-convertible debentures (NCDs) worth Rs7,400 crore with Life Insurance Corporation of India (LIC) and the Employees Provident Fund Organisation (EPFO), reports quoting sources at SBI Caps said today.

Air India had, late last week, announced the scrapping of a plan to sell five Boeing 777s, as it could not find any buyers for these. The airline had planned to sell two Boeing 777 200-LR (long range) aircraft and three Boeing 777 300-ER (extended range) aircraft.

The 19-year bond, which has a coupon of 9.08 per cent, will fetch 9.27 per cent for LIC and the EPFO on maturity.

Air India sources, meanwhile, said LIC will take Rs3,000-crore worth of bonds while the provident fund organisation will absorb the remaining Rs4,400 crore worth of bonds.
 
While LIC and FPFO have agreed to pick up the Rs7,400-crore bonds, SBI Caps, which is the sole arranger for the issue, said the bond sale would remain open till 18 December.

India Ratings has assigned Air India's Rs7,400 crore non-convertible debenture (NCD) issue a final rating of 'IND AAA (SO)', the highest safety rating in terms of timely servicing of financial obligations. The rating reflects lowest credit risk and reflects the absolute, unconditional and irrevocable guarantee extended by the Government of India.

The guarantee will also remain in force even if Air India fails to meet its NCD obligations due to any dissolution or winding up or similar proceedings initiated by or against the company.