Public-sector lender IDBI Bank will lead a consortium in arranging $1 billion needed to bail out national carrier Air India. The state-owned airline has been struggling to arrange funds for acquiring Airbus A319 and A320 aircraft, the order for which has already been placed with Airbus Industries.
Banking sources said IDBI Bank, along with another banks, was syndicating the loan. The move came after Air India failed to get funding interest from European commercial banks despite the loan carrying sovereign guarantees.
The European banks’ reluctance reflects how lenders have turned risk averse when it comes to aviation funding.
Owing to the global financial meltdown, there is a multibillion-dollar “gap” between the cost of jets due for delivery this year and the money available to pay for them, according to an analyst.
While confirming the bank’s interest in financing the deal, a senior official said IDBI Bank would not fund the entire deal. The size of IDBI’s balance sheet and prudential norms limited the scope for taking such a huge exposure to a single entity, he said, adding that the bank would take some portion of the funding on its books.
According to sources, the tenure of the loan is expected to be 10-12 years and the interest rate in the band of 12-15 per cent.
The IDBI official, however, said the details were yet to be finalised and, hence, it would be difficult to say which banks would comprise the consortium.
