By Santanu Choudhury
NEW DELHI--Air India Ltd. Friday put off the deadline for
bankers to submit bids to underwrite a 74 billion rupee ($1.3
billion) bond sale, according to its website.
It has also extended the deadline by about a week for lenders to
offer a $500 million bridge loan to pay for four Boeing Co. (BA)
787-800 Dreamliner planes because of weak response from bankers, an
Air India executive, who didn't wish to be named, told Dow Jones
Newswires.
He and another executive didn't give any reasons for the
postponement of the bond sale.
On its website, the national carrier said it will announce by
Sept. 20 a new deadline for submitting bids for selling the
bonds.
Air India hasn't made a profit for the past five years and is
surviving mainly on cash handouts from the government. The bond
sale is part of its efforts to turn around its operations.
The turnaround plan includes using the long-range and
fuel-efficient Dreamliner planes to cut costs and fly to new
destinations, besides taking financial aid from the government and
restructuring of debt.
The carrier first announced its plan to privately sell the bonds
in July, but has since been deferring the sale.
The bonds, which would be backed by the government, are to
mature in 19 years and their principal would be repaid in five
equal installments from the 15th year.
Air India plans to pay an interest rate equivalent to a
government bond of the same maturity, but has specified a yield
ceiling of 9.50% at par.
Merchant bankers said few or no bids have been submitted as Air
India has yet to receive a federal guarantee for what could be the
largest ever government-backed debt sale of any Indian state-run
company.
On the $500 million loan tender, the first Air India executive
said the company got response from just a couple of banks. "We
expect a better response once the Dreamliners start coming in."
Air India Thursday took delivery of its first Dreamliner after a
delay of about four years and the aircraft will land in New Delhi
Saturday. The carrier, which ordered 27 Dreamliner planes in
January 2006, will be taking the delivery of two more jets this
month.
Air India has already arranged financing from Standard Chartered
Bank to pay for the first two Dreamliner jets.
It plans to sell the planes to a leasing company and operate
them by paying monthly rentals, a common fundraising procedure
among air carriers.
The funds from the sale to leasing companies will be used to
repay the bridge loan, which won't be backed by the government.
--Khushita Vasant in Mumbai contributed to this article
Write to Santanu Choudhury at santanu.choudhury@dowjones.com
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