Government may get IFC to underwrite AI debt for buyer: report

16 Apr 2018

The government is likely to rope in World Bank’s investment arm International Finance Corporation (IFC) in the divestment process of debt-laden national carrier Air India by underwriting its huge debt.IFC is reported to have been in talks with sources close to the transaction and may underwrite the entire debt for the successful bidder.
The agency, however, said much will depend on the agency’s assessment of the successful bidder.
Besides, four major airlines, including Etihad, Lufthansa, British Airways owner IAG and Singapore Airlines (SIA), some financial institutions and sovereign funds are reported to have shown interest in acquiring Air India.
Last month, a consortium of Jet Airways, Air France-KLM and Delta Airlines was understood to have expressed interest in the disinvestment of Air India, according to reports.
However, two potential bidders — IndiGo and Jet Airways — who had earlier shown interest in the ambitious stake sale of Air India have decided to keep away, citing issues with its two subsidiaries.
Early this month, IndiGo president and whole time director Aditya Ghosh had said the airline had expressed interest in the acquisition of Air India’s international operations and Air India Express.However, under the government’s current divestiture plans for Air India thtat option is not available.
“Also, as we have communicated before, we do not believe that we have the capability to take on the task of acquiring and successfully turning around all of Air India’s airline operations,” he had said in a statement.
IndiGo was the first to evince interest in Air India disinvestment when the government had mooted the plan last year.
As of now, there is no official word about any particular entity participating in the bidding process.
Except SIA (which has a JV with Tatas that is tipped to bid for AI), the other three carriers are reportedly in talks with Indian business houses.
While the agency is not participating in AI’s bidding process, it is “watching the process closely and may get involved at a later stage.
”IFC’s involvement will be a major boost to the divestment of Air India in which the government has invested heavily.
The government has extended a Rs33,392-crore debt-cum-working capital loan to the AI-AI Express and AI SATS combine.
The government proposes to offload up to 76-per cent stake in Air India and transfer management control to private players as per the detailed preliminary information memorandum.
According to the preliminary information memorandum, issued on 28 March, the government will retain 24 per cent stake in Air India, while the winning bidder will be required to stay invested in the airline for at least three years.

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