The government is also trying to sweeten the deal by allowing flexibility on the debt component of Air India. There is talk on giving investors the flexibility to decide on the high debt of the airline. The flexibility if it comes will replace the current condition of the buyer taking over more than a third of the debt and transferring the rest to a special purpose vehicle.
Some potential investors have sought flexibility and asked that the debt should not be fixed at the stage of the bidding.
The government has been trying to sell Air India for the past few years. According to a report by financial services house, HSBC, previously, when the government tried to sell Air India, the terms and the shape in which government wanted to sell Air India were not sufficiently attractive to any of the potential buyers. Hence the government has sweetened the deal this time and has decided to be more flexible with the terms.
First of all, the government is ready to sell a 100 per cent stake in Air India (previously, it was selling only 76 per cent which was a sticking point for potential buyers as the fear of continuous government intervention deterred many potential buyers).
In addition, the government has shifted almost 60 per cent of the total debt to a SPV. Total debt on Air India's balance sheet stood at $8 billon, but the government has transferred $5 billion of debt to a SPV and the buyer will have to absorb $3 billion of debt, most of which is aircraft-related.
Airlines globally are under financial stress with tourism and hospitality along with aviation being the worst hit sectors.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
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