Air India | Talace
Banks offer Rs 35,000 cr loan to Air India's new owner Talace promoted by Tata
Mumbai/IBNS:Air India has been offered a loan of over Rs 35,000 crore at a weighted-average yield of 4.25 percent, the cut-off rate at which the government last raised one-year money through an auction of 364-days treasury bills, ET reported.
Talace, promoted by Tata Son, had invited bids for a one-year general purpose loan of Rs 23,000 crore from the airline's existing lenders.
This includes Rs 18,000 crore for taking over Air India's debt and an additional Rs 5,000 crore for initial operating costs.
Talace will take over Air India following its disinvestment last October after the government accepted the highest bid of Rs 18,000 crore made by Tata Sons for 100 percent equity shares of Air India and Air India Express, and 50 percent stake in ground-handling company AISATS.
Of this, Rs 15,300 crore is for Air India's existing debt and Rs 2,700 crore to be paid as cash to the government.
"It is an overwhelming response considering that the loan is unrated and unsecured and yet the pricing is near sovereign," said an executive at one of the lenders, which has sanctioned nearly Rs 3,000 crore, stated the ET report. "Further, it shows lenders' confidence in the Tatas despite them informing banks that it would be at least six months before they can make any projections for the business."
PSU banks like State Bank of India, Bank of Baroda, Punjab National Bank and Union Bank of India have approved credit limits in the range of Rs 12,000 crore to Rs 3,000 crore, the ET report said citing a source.
Banks that have sanctioned loans to the Tatas have passed a special resolution to lend to Talace below the marginal cost of fund-based lending rate (MCLR), which is currently pegged at over 7 percent for most banks, according to the ET report.
Marginal Cost of Funds based Lending Rate (MCLR) is the minimum lending rate below which a bank is not permitted to lend.
The Tatas will intimate each lender about the allocation January first week and draw sanctioned limits between January 10 and 15, the same person said, the report stated.
According to the report, the Tatas had first decided to refinance the loan of Air India before Christmas which was the long stop date to finsih the Air India deal but this couldn't be done due to some "conditions precedent" stipulated by the government and some of these will be executed following the takeover.
The report stated that the new debt raised by Talace will replace the existing Air India loan raised at 9 percent to 10 percent.
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