SUCCESS
Air India bond sale success a fillip to its disinvestment

The success of Air India’s bond issue, and especially the participation from foreign investors, is seen as an encouraging build up to the eventual disinvestment of the national carrier.

Market watchers say that the interest in the long term bonds was intrinsically linked to the disinvestment of Air India.

“If the disinvestment happens then we will see better yield on the bond for investors,” said Mark Martin, the founder of aviation advisory firm Martin Consulting.

Significant to the success was the interest from Singapore, where the bond was marketed.

“It was a smart thing to do. Singapore still has the ‘old-world’ perception of Air India as a world airline and doing well in its hey-days,” says Martin.

Investors, including institutions from Singapore and China, are said to have participated in the bond issue.

Record mop up

The airline’s SPV, Air India Assets Holdings Ltd (AIAHL), raised Rs 7,000 crore earlier this week through bond sale that was oversubscribed more than 20 times.

The AIAHL came out with a bond issue for Rs 1,000 crore with an option to retain the additional subscription worth up to Rs 6,000 crore. It helped that the bonds had the backing of the government.

State Bank of India, ICICI Bank and Trust Capital were among those who participated in the bond sale.

The funds will help bring down Air India’s debt of Rs 58,000 crore. The bond sale will be followed by another issue of 10-year bonds worth Rs 15,000 crore.

Clearing the deck

After the success of the sale, the government has stepped up on the disinvestment process.

The meeting of Air India Specific Alternative Mechanism on September 19 has taken another step towards the divestment process.

The Business Standard reported that the meeting had given a ‘formal political approval’ for the divestment.

The second attempt is extremely important as the government will be keen to avoid the failure of the first attempt, when it failed to get even a single interest for the national carrier.

Apart from the huge debt of Air India, the government’s plan to retain 24 percent stake in the national airline was said to be major stumbling blocks.

The parking of debts on to the SPV and the issue of bonds is expected to encourage prospective suitors of the airline. Also, this time around the government may hold on to just 5 percent of the holding, ensuring that the operational control of the airline could be with new owner.

[“source=moneycontrol”]

About the author

Related Post