The civil aviation ministry has turned down the conditional sovereign guarantee offered by the finance ministry to Air India's Rs 7,400 crore non-convertible debentures (NCD) issue. We cannot accept the sovereign guarantee with conditions and have informed the finance ministry. What does a sovereign guarantee mean,if it is with conditions? If it means that the government will not hold,if the conditions are not met then what is need of having a sovereign guarantee. Not only that,a conditional sovereign guarantee will impact the rating of the bond and the bond issue will not find any takers, said a senior civil aviation ministry official. He further added that civil aviation minister Ajit Singh will meet finance minister P Chidambaram soon to discuss the issue of conditional sovereign guarantee. The civil aviation minister is updated about this issue and is ready to talk to the finance minister, said the official. Due to delay in receiving approval from the finance ministry,the national carrier had to postpone the closing dates for the bond issue twice and even then will not be able to meet the deadline for closing of the NCD issue. According to the turnaround plan (TAP),the airline had to close the bond issue by September 30,2012. The money raised from the bond issue will be used to repay the short-term debt to the banks as part of the financial restructuring package that includes restructuring of Rs 18,000 crore of Air India's short-term debt. Of Rs 18,000 crore,around Rs 10,600 crore has been converted to long-term debt with a repayment period of 15 years at a lower interest rate and repayment of Rs 7,400 crore to banks through a bond issue. The restructuring was part of a TAP that included infusing Rs 30,231 crore in the airline over a period of nine years till 2020-21. The equity infusion is conditional and the performance is reviewed time to time. The performance conditions include improving the airline's on-time performance to 90 per cent. It also has to improve its passenger load factor to 73 per cent by 2015,and to further increase it to 75 per cent beyond 2015.
