Air India seeks bondholder's nod to advance maturity of two bonds at a premium

Air India has sought bondholders' nod to advance the maturity of two series of bonds sold in September 2011 before the national carrier's impending takeover by the Tata Group. 

The airline's board has approved prepayment with a premium of NCDs (non-convertible debentures) amounting to Rs 12,900 crore comprising two series of Rs 7,400 crore and Rs 5,500 crore. The board also approved amendment in the respective Debenture Trust Deed (DTD). 

"The Board of Directors have approved by circulation the pre-payment of Non-Convertible Debentures amounting to Rs. 12,900 crore (Two Series of Rs. 7,400 Crore and Rs. 5,500 Crore) at Premium issued by Air India Ltd along with amendment in the respective Debenture Trust Deed (DTD) vide its Circular APP.156 dated 16 January 2022," Air India said in its filling. 

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Through the move, the airline has attempted to ensure that bondholders bear no losses.

The bonds, backed by a government guarantee, offered 9.84% and 10.05% respectively, along with 15- and 20-year maturities.

Air India took the decision to prepay the NCDs at a premium instead of on a par in order to safeguard existing investors from incurring any loss.  

On October 25, the government had signed the share purchase agreement with Tata Sons for the sale of the national carrier for Rs18,000 crore. Tatas would pay Rs 2,700 crore cash and takeover Rs 15,300 crore of the airline's debt. The cash component would come once the handover process is completed. 

While this will be the first privatisation since 2003-04, Air India will be the third airline brand in the Tatas' stable - it holds a majority interest in AirAsia India and Vistara, a joint venture with Singapore Airlines Ltd. 

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Tata's acquisition of Air India will give it access to a fleet of 117 wide-body and narrow-body aircraft, and Air India Express Ltd another 24 narrow-body aircraft besides control of 4,400 domestic and 1,800 international landing, and parking slots at domestic airports. 

Air India started suffering losses every year since its merger with Indian Airlines in 2007-08. 
A Turnaround Plan (TAP) and a Financial Restructuring Plan (FRP) were approved for Air India by the previous UPA regime in 2012. 

However, the TAP did not work out, and Air India continued to reel under losses, with the government giving Rs 20 crore per day to keep the airline afloat. 

Over the last decade, more than Rs 1.10 lakh crore was infused by way of cash support and loan guarantees in the loss-making airline to keep it afloat.