DTN News: Nacil Raises $1 billion From JPMorgan

DTN News: Nacil Raises $1 billion From JPMorgan

*Source: DTN News / Int'l Media

(NSI News Source Info) MUMBAI, India - July 14, 2009: State-run National Aviation Co. of India Ltd, or Nacil, the operator of Air India, is raising about $1 billion (around Rs4,870 crore) in the form of an 11-year loan from US bank JPMorgan Chase and Co. to fund a part of its ambitious fleet expansion exercise.

Air India flies a large fleet including several widebody aircraft types, including the Boeing 777, which is the airline's latest widebody type acquisition. The airline also flies the Airbus A300, A310 and A330-300, and several versions of the Boeing 747 plus a single Boeing 767. It has also ordered the Boeing 787 Dreamliner. Air India is the result of a merger between the former international airline Air India and the domestic carrier Indian Airlines. Air India ordered the Boeing 777-200ER and the 777-300ER. The photograph shows a 777-300ER approaching London Heathrow Airport.

The loan, guaranteed by the US Export-Import Bank (US Ex-Im Bank), according to two bankers familiar with the transaction, may help the cash-strapped airline save about $1 million a month in interest costs. Nacil posted a Rs5,000 crore loss in fiscal 2008-09.

“Nacil had floated a tender to raise $1.06 billion to buy 10 Boeing planes. It is getting this loan from JPMorgan at attractive terms,” said a senior official of the ministry of civil aviation, who didn’t want to be named.

The official declined to disclose the cost and structure of the loan. A banker aware of the deal said the loan is being raised at around 100 basis points (one basis point is one-hundredth of a percentage point) over the London interbank offered rate (Libor). Six-month Libor is now close to 1%. Kalpana Morparia, chief executive officer of JPMorgan Chase’s India operations, declined to comment for this story.

Typically, loans guaranteed by the US Ex-Im Bank, the US government’s trade financing arm, are cheaper than normal external commercial borrowings. The US Ex-Im Bank offers guarantees for loans used to purchase goods or machinery from the US, based on a counter-guarantee by the local government.

Nacil will use this money to buy three 777-200 and four 777-300 planes from Boeing Co. for its international operations, as well as three 737-800 planes to ply on domestic routes. Nacil is also buying one aircraft engine from General Electric Co.

These purchases are part of an order Nacil made in 2005, at the peak of the aviation boom in India, for 111 aircraft—68 from Boeing and 43 from Airbus SAS—at a list price of nearly $15 billion.