Air India Assets Holding Limited (AIAHL), a special purpose vehicle created to partially relieve Air India of its debt liabilities, on Monday raised ₹7,000 crores to refinance its debt after a bidding process where its bond issue was fully subscribed.

The development means that AIAHL has been able to refinance nearly 25% of the ₹29,464 crore debt at a rate of 6.99%, which is lower than the interest rate Air India has been paying on its loans by 150 to 200 basis point, according to a senior Air India official.

AIAHL was set up by the government in February after a Cabinet decision and nearly half of the total ₹58,000 crore of debt of Air India was transferred to it. The bond issue is for a three-year tenure.

“This reflects the confidence of the entire market in securities fully backed by Government of India. The positive response received from all categories of Investors will act as a stimulus to the disinvestment process of Air India Limited,” Air India CMD Ashwani Lohani said in a press statement.

“The issue was oversubscribed by 20.83 times despite the volatile market conditions today. It was the largest mobilisation of funds for yield-based bidding in the history of BSE’s Electronic Bidding Platform,” AIAHL director, Vinod Hejmadi said.

Among the entities that won the bids, the State Bank of India group had put in bids worth ₹3,640 crore, ICICI Group ₹1,900 crore and Axis Bank ₹1,050 crore, according to sources.

Air India officials also say that soon they will issue bonds for ₹15,000 crore for a ten-year tenure where they expect interest from EPFOs and insurance companies.

This will leave it with a debt of ₹7,400 crore for which the government has already guaranteed non-convertible debentures.

GoM meet

The development comes at a time the Group of Ministers headed by Home Minister Amit Shah is expected to meet on Thursday to take a decision on the modalities of Air India’s privatisation, including, the quantum of disinvestment, debt waiver as well as easing of FDI norms to attract foreign players.

FDI for Air India is right now capped at 49% through approval route.