tata group: Air India lenders offer 35,000 crore loan to Talace, promoted by Tata

Air India lenders have offered to extend more than 35,000 crore rupees to the Tatas at a weighted average yield of 4.25% – the rate at which the sovereign borrows for a year, people familiar with the matter have said. .

Talace, promoted by Tata Sons, which will take over Air India after privatization, had issued a tender for a one-year 23,000 crore general purpose loan from the airline’s existing lenders.

Special resolution

This includes 18,000 crore for Air India’s debt assumption and an additional ₹ 5,000 crore for initial operating costs as previously reported. Talace was declared successful by Air India in October.

The weighted average yield of 4.25% is the closing rate at which the government last raised one-year funds through a 364-day T-bill auction.

“This is an overwhelming response given that the loan is neither rated nor guaranteed and yet the price is close to sovereignty,” said an executive at one of the lenders, who sanctioned nearly 3,000 crore. “Also, it shows the confidence of the lenders in the Tatas although they have informed the banks that it will take them at least six months before they can make any projections for the company.”

Tata Sons did not respond to questions.

Major commercial banks such as the State Bank of India, Bank of Baroda, Punjab National Bank and Union Bank of India have approved credit limits ranging from 12,000 crore to 3,000 crore, one of the officials said. persons cited above. The Tatas will notify each lender of the allowance during the first week of January and set authorized limits between January 10 and January 15, the same person said. Banks that have sanctioned loans to the Tatas have passed a special resolution to lend Talace below the marginal cost of the funds-based lending rate (MCLR), which is currently set at over 7% for most banks.

“Tatas had originally planned to complete the refinancing of the Air India loan before Christmas, before January 23, the deadline for concluding the Air India deal with the government,” said the second person quoted above. But this was not possible due to several “conditions precedent” stipulated by the government. It appears that some of them will now be executed after the takeover, the same person said.

The new debt raised by Talace will replace the previous credit raised by Air India at 9-10%. Talace had offered 18,000 crore as part of its winning bid – 15,300 crore for Air India’s existing debt and 2,700 crore to be paid in cash to the government.

The agreement with the government does not include land and buildings. As per the agreement, Tata Sons will retain all Air India employees, at least for one year. Air India has a fleet of 117 aircraft.

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