Air India refinances loans with SBI and BoB at near G-Sec yields
Air India has refinanced short-term loans with the State Bank of India (SBI) and Bank of Baroda (BoB) for a three-year loan at an attractive rate, thanks to the conglomerate's strong credit profile.
The new Rs 19,000 crore loan will be used to finance the carrier's working capital needs and upgrade its aircraft fleet, people familiar with the details said.
The loan has replaced the short-term Rs 18,000 crore bridge loan Air India had availed from SBI and BoB to complete the Tata group's takeover of the erstwhile national carrier in January 2022. It was subsequently renewed for a year in 2023.
«The term loan is slightly higher than the initial short-term loan taken by the airline. SBI has a major share in the loan at about Rs 13,300 crore while BoB's share is Rs 5,700 crore. This loan now replaces the bridge loan facility. The company will use this money to manage day-to-day costs and upgrade existing planes,» said one of the persons cited above.
The deal, which was in the works for a few months, was completed last quarter. Air India was seeking to refinance its short-term loan facilities with local banks with a longer tenure term loan, ET reported in April last year.
«Air India finally chose to go along with both the existing banks which are amongst the largest in the country. The loan was priced at 7.5% and is linked to short-term government treasury bills with a reset clause every year,» a second person said.
At 7.5%, the loan was priced at a very thin margin as the six-month treasury bill was hovering
