Government plans to raise over ₹30,000 crores via bond sale to solve Air India’s debt issues: Report

Tata Sons acquired the deal to purchase a debt-laden airline with a winning bid of Rs 18,000 crore, of which the debt took over by Tata will be Rs 15,300 crore while Rs 46,262 crore will continue with AIAHL.

The Centre is contemplating raising over Rs 30,000 crores through a bond sale to compensate for the debt of troubled Air India.

Quoting a senior official informed about the matter, a report by The Economic Times said that Air India Asset Holdings Ltd (AIAHL), a special purpose vehicle designed to hold the non-core assets, property and the debt of Air India, which Tata won’t be taking up, will be the issuer of the bonds.

“While the monetisation of assets and earnings through sale will help in repayment of a substantial portion of AI’s debt, the government will still require to pay over Rs 30,000 crore, and that will be raised through bonds,” source cited above said on the requirement of anonymity.

Tata Sons acquired the deal to purchase a debt-laden airline with a winning bid of Rs 18,000 crore, of which the debt took over by Tata will be Rs 15,300 crore while Rs 46,262 crore will continue with AIAHL. The cash compensation of the transaction will be Rs 2,700 crore.

The deal also packages Air India’s profitable low-cost arm Air India Express and 50 per cent of AISATS, which provides cargo and ground handling assistance at significant Indian airports, to the Tatas. Nearly Rs 35,000 crore of liability will be paid from the proceeds of the asset sale and the Tata Group, the person said.

Along with its latest bid to market Air India, the government amended the measures in October 2020 and announced proposals based on enterprise value. According to the latest plan, the triumphant bidder does not have to undertake any predetermined debt.

As part of the sale-purchase approval to purchase Air India, the Tata Group will maintain all of Air India’s around 12,000 employees for at least a year. Following one year, the Tata Group will choose to allow the employees of Air India a deliberate retirement plan, the features of which have not been established with the government as part of the current share purchase agreement.

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