India Ratings and Research (Ind-Ra) has affirmed Air India Rs 74 billion non-convertible debenture (NCD) programme issue at 'AAA(SO)'.  

The rating reflects the absolute, unconditional and irrevocable guarantee extended by the government of India (GoI) for the timely repayment of principal and interest on the rated NCDs. It is a continuing guarantee and shall remain in force and effect until the complete discharge of NCD obligations. The guarantee will also remain in force if AIL cannot meet its NCD obligations due to any dissolution/ winding up or similar proceedings initiated by or against the company or for any other reasons. These include any reference of the company to the Board for Industrial and Financial Reconstruction or AIL being brought under the purview of any other authority notified under any law.

AIL has opened a no-lien bank account (the designated account) in which interest payments as well as principal repayments will be deposited by the issuer/guarantor. This account will be held by the bank to the order of the trustee. The guarantee mechanism provides for monies to be made available to the designated account at least one day before the due date of NCD payment.

The NCDs were issued in November 2012 and have a tenor of 19 years, with principal redemption in five equal instalments starting from the 15th year and interest payments being made bi-annually. The NCD issue is a part of the government's financial restructuring plan for reviving the airline. The proceeds of this NCD issue were used to repay outstanding Rs 73,916.7 million short-term bank loans, interest thereon,  as well as expenses in relation to the issue of the debentures and the GoI guarantee fee.

Ind-Ra has obtained confirmation from the trustee that till date AIL has been funding the designated account well before the due dates and interest payments to investors have been on the due dates. In addition, the GoI guarantee has not been invoked so far.