Air India: Tatas should raise up to Rs 15,000 crore in loans to support the purchase of Air India

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The Tata Group could raise as much as 15,000 crore rupees with a syndicated loan to support its acquisition of Air India, people familiar with the matter told ET.

The loan can be lifted with a three-year maturity offering around 7%, they said.

The State Bank of India (SBI) is expected to be the primary banker for the proposed syndication, as it has already issued a bank guarantee required for the tender.

A group of foreign banks including Standard Chartered, Citi, Deutsche, JP Morgan and Barclays and some local banks are in talks with the group, sources said.

“If foreign banks are not divorced, SBI will remain the key banker,” one said.

Individual banks could not be contacted immediately for comment. SBI did not respond to ET’s query at press time on Sunday.

A spokesperson for Tata Sons said: “We have been declared the winners of the offer (for Air India). We look forward to working with the Indian government to complete the process over the next few months. We will not be able to comment further until later.

The auto-aviation conglomerate was declared the winner of the national carrier on Friday after a process that lasted nearly four years and two attempts. The letter of intent is expected to be delivered to the Tatas on Monday.

The contours of the proposed loan are being discussed and the end use of the product is yet to be concluded, the people named above said. Options for bonds are also not excluded, they said.

Even overseas fundraising can be explored depending on the cost of coverage, they said.

“It all depends on the fungibility of the money and how the group wants to structure it,” said one of the people involved in the case.

There are certain limits for local banks that finance any land acquisition. However, public sector lenders benefit from an exemption.

“The relationship between the SBI and Tata goes very far,” said one of the people. “Even foreign lenders have contacted the group to solicit their participation in any fundraising. ”

Some foreign banks have reportedly sent termsheets to the Tatas.

Lenders are expected to hold another round of talks this week, sources said.

Tata Sons, a triple A rated entity, may well be the borrower in a possible fundraising structure. If he takes out a loan, it will be cheaper than any existing Air India debt. The proceeds could be used to refinance and reduce financing costs. Under the current circumstances, Air India in its current form is charged lower credit by the lenders.

“SBI appears to be a preferred bank because it also issued BG for the bidding process. The bank is in constant contact with the Tata group, ”said a senior banker.

Air India’s total debt at the end of August was Rs 61,562 crore. From this the Tatas took charge of Rs 15,300 crore.

Almost all of the debt – some of which is non-convertible debentures – is short-term with a term of one year, said a person familiar with the development. The borrowing rates vary between 7 and 9.5%. “Some of them are backed by sovereign government guarantees while others are not,” he said. “Ownership of the loan has changed and it is now up to the Tatas to refinance or pay them back.”

The procurement process is expected to be completed by December of this year. This has created lending opportunities for banks which have faced moderate credit growth since the pandemic began in March of last year.


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