Air India is planning to secure another short-term loan of $2.1 bn from Bank of India (SBI) and Bank of Baroda (BoB) to refinance its current debt as a part of airline’s short-term strategy to refinance its existing debt before it embarks on long-term borrowing solutions for its future business needs. This loan has a duration of one year.
Last year, Air India had secured a loan of INR 10 bn ($120 million) from SBI and INR 5 bn ($60 million) from BoB at an interest rate of 4.25%. Because Reserve Bank of India has since raised its repo rate, the new loans will attract an interest of 6.50%.
According to a report in the Economic Times, these loans are a continuation of the debt facility that the company availed after it took over the airline. The report added that the company decided to continue with the current borrowing arrangement for another year. They are likely to make another long-term strategy, it said.
Going ahead, the airline plans to enter long-term borrowing arrangements from government and private banks after it merges operations with Vistara. As per the sources, the airline has undertaken the merger formalities on priority as that will decide the nature and amount of funds needed for further operations. The loans are expected to be long-term in nature and a mix of public and private sector banks.