To participate in stake sale process, IFC may underwrite Air India debt

New Delhi: International Finance Corporation (IFC) has evinced interest to participate in the Air India sale process. The World Bank’s private investment arm is assessing potential investment opportunity in the state-owned airline and is willing underwrite the entire debt amount for the successful bidder.
“IFC has had rounds of discussion with transaction advisor EY for the Air India deal and have said they would explore opportunity to work with a successful bidder by underwriting the debt amount,” a person aware of the developments said.
Centre has called for bids to sell 76% in Air India along with 100% in low-cost arm Air India Express and 50% stake in joint venture AISATS, which is into ground handling business.
When contacted an IFC spokesperson said that it was watching the Air India sale process and may evaluate options of getting involved when the transaction is complete. “At present IFC is not involved in Air India divestment process as normally we don’t join during bidding phase. However, we are committed to bridging development gaps in India and financing transport and logistics is one of our top strategic priorities.
Therefore, we are watching the Air India process closely and may get involved at a later stage,” he said. “Once the winning bidder is chosen, we will evaluate the situation to see if we have a role to play,” he added.
Potential bidders have publicly expressed inability to agree to terms of the transactions which includes taking over portion of the airline’s debt and retaining employees for a year. As part of the deal, a successful bidder has to take over Rs 333.92-billion debt which includes current liabilities, which have been incurred in the natural course of business. The government has agreed to hive off the remaining portion of debt to a separate holding company.  “It is the question based on the evaluation that we did and felt that this level of debt on the asset may not be appropriate for us. It may be appropriate for someone else,” Amit Agarwal, deputy CEO of Jet Airways, had said.
A second person said that the discussions were in very preliminary stage and whether IFC will ultimately invest or not depends on the selected bidder. “IFC is not in the business of managing companies so they do not seem to be much interested in cases where debt is converted to equity and management is replaced, one way they may get involved is by investing in security receipts issued by asset reconstruction companies,” the person said.
IFC has been active in equity, quasi-equity and debt finance deals in India across sectors. IFC South Asia director Mengistu Alemayehu had earlier said that the organisation was looking to investing in distressed assets in India through reconstruction companies, either through a fund platform or a holding platform. For this purpose in January it had formed a joint venture with Clearwater Capital Partners.
Source : TOI

Leave a Reply

Your email address will not be published. Required fields are marked *