Nepal Airlines (RA, Kathmandu) is on the hunt for over USD1 billion in fresh loans from suitably qualified lenders to fund aircraft acquisitions, construction of a hangar, and the servicing of existing loans, with the state-owned carrier issuing a request for expressions of interest (EOI) from lenders on January 23, 2024.
According to the EOI documentation, the loan period will be 25 years, with extensions possible subject to mutual agreement. The airline requires a fixed interest rate for the entire loan period, with interest payable quarterly. Of the USD1.018 billion sought, USD565 million will go towards acquiring new aircraft, USD415 million will go towards managing existing loans, and USD38 million will fund a hangar construction project.
"The financing will be secured by (a) lien(s) over the assets, equipment, and project related to the financing," the documentation reads. Lender pre-qualification criteria include possessing the necessary licencing to undertake international financial transactions, having financed at least two projects worth USD1 billion or more in the past seven years, and having a net worth at least ten times the amount to be lent to Nepal Airlines.
The airline is not accepting EOIs from joint ventures, saying it will consider offers only from sole lenders. However, the eligible sole lender list includes governments and government agencies, domestic and international financial institutions, banks, and other suitably licenced and qualified lending organisations.
Nepal Airlines presently flies to ten international and 22 domestic destinations. Its fleet of two A330-200s and two A320-200s handle international flights, while its two DHC-6-300s service the domestic network. Last year, the carrier issued an RFP concerning acquiring three short-take-off and landing aircraft. More recently, its executive chairman, Ubaraj Adhikari, told ch-aviation that he also wanted to lease two to three narrowbody jets to service a planned expansion of the international network.
"The objective of the international loan is to strengthen the Nepal Airlines’ fleet and swap the existing loans with the loan taken from the international lenders, which could be available at less than 5% per annum," a Nepal Airlines spokesperson told The Kathmandu Post this week. "The process follows the government’s approval and has been passed by Nepal Airlines Corporation’s board of directors."
The same outlet reports the airline is servicing a NPR48 billion rupee (USD360.5 million) loan taken out to buy the four Airbus aircraft last decade and paying an interest rate of 10% per annum. The newspaper also reports the issuance of the EOI took the government by surprise. "We have been repeatedly telling Nepal Airlines to restructure before planning any expansion," said Finance Minister Prakash Sharan Mahat. "I don't know what's going on."
Complete sets of the EOI documents are available from Nepal Airlines until the close of business on March 6, 2024. Initial EOIs must be submitted by 17.00L (11.15Z) on March 7. The airline will then shortlist prospective lenders, with those making the cut invited to submit a more detailed proposal.
In response to reporting that the EOI issuance took the government unawares, the Nepal Airlines spokesperson said once the shortlist of lenders had been compiled, the airline will then seek cabinet approval.
“We need planes,” the spokesperson said. “Even if we can bring down the existing interest rate of the loan we have taken to 5%, it will be a huge relief.”
