Air India (AI, Delhi International) has managed to achieve INR140 billion rupees (USD1.7 billion) in fresh funding from two Indian financial institutions after refinancing existing debt and accessing the Indian government's Emergency Credit Line Guarantee Scheme (ECLGS).
According to India's Mint outlet, the Tata Sons-owned airline closed the deal with the State Bank of India (SBI) and the Bank of Baroda. The funding was secured after refinancing existing loans with the two banks as well as tapping the ECLGS for INR15 billion (USD182.6 million).
Mint reported that the refinancing package is benchmarked to the SBI's six-month marginal cost of funds-based lending rate (MCLR), plus 50 basis points. The SBI's current MCLR is 8.4%. Indian analytical company Crisil Ratings recently reaffirmed its AAA rating for Air India's long-term bank loans and an A1+ rating for its short-term loans.
"Bankers are more than willing to lend to Tata Group. Given that there are very few large corporates looking for bank loans, lenders are eager to lap up such proposals," sources told the outlet. The same sources said the funding would be used to support Air India's proposed market expansion as well as the acquisition of new aircraft.
In February, Air India announced a firm order for 470 aircraft, including 220 planes from Boeing and 250 aircraft from Airbus. After Tata Sons acquired the former state-owned airline in the first quarter of 2022, the flag carrier embarked on an aggressive campaign to upgrade both its hard and soft products in an effort to restore its former fortunes. Last week's news is the latest in a series of funding announcements since the Tata Sons purchase, all earmarked to help pay for the upgrade strategy.
Twenty-five aircraft from the February order are expected to arrive in the first half of 2023. In addition, Air India began taking delivery of multiple leased aircraft in late 2022. Inbound leased aircraft include twenty-one A320-200Ns, four A321-200Ns, and five B777-200ERs.
