The proceeds of the loan, which would be backed by a sovereign guarantee, would be used to refinance the foreign currency bridging loans taken out to purchase seven Boeing 787s and 777s. It also offers aircraft such as the Boeing 787 and 777 as collateral for the loan, which will be reimbursed in one year.

Air India will raise the total amount in seven installments, which would consist of three installments of ₹790 crore each, three slices of ₹925 crore each, and a slice of ₹1005 crore, according to the tender document.

The interest rate payable by the national carrier will be linked to the “MCLR / GSEC rates with a reasonable spread as a margin”. over the remaining period for the repayment of a loan. As a general rule, banks cannot lend at a rate lower than the MCLR of a particular maturity for all loans linked to that benchmark.

A copy of the tender document has been reviewed by the Mint.

Air India’s fundraising efforts come as part of the government’s proposed plan to divest its stake in the airline amid the pandemic that has crippled the aviation and travel sectors.

The government overhauled the ailing carrier’s terms of sale last month. Air India will now be offered on the basis of its enterprise value and bidders will be able to indicate what level of debt they are comfortable with.

Air India has short-term liabilities and provisions, including short-term borrowings and trade payables of ₹70,686.6 crores and a net debt of ₹58,255 crore at the end of fiscal 19. However, the government transferred ₹29,464 crore of this Air India debt to a government-owned special purpose vehicle, Air India Assets Holding Company Ltd.

The government, however, rejected the national carrier’s request for an injection of equity capital, agreeing instead to act as sovereign guarantor of the airline’s debt.