The turmoil in the aviation industry due to the spread of coronavirus has started reflecting on the ratings of debt securities issued by Indian carriers. On March 24, rating agency CRISIL downgraded its rating on the non-convertible debentures (NCDs) of government-owned Air India amounting to ₹700 crore.
The rating of these NCDs was downgraded to CRISIL BB+(CE) from CRISIL AAA(CE), and the rating remains on ‘Rating Watch with Negative Implications’. However, the ratings on the remaining NCDs (₹5,500 crore and ₹7,400 crore) of Air India have been reaffirmed by the rating agency at CRISIL AAA(CE)/Stable.
The CRISIL rating document says that the NCDs worth ₹700 crore is due to be repaid on March 26, 2020. The NCDs were issued in March 2010 and carry a coupon rate of 9.13 per cent.
IDBI Trusteeship, the trustee for the instrument, had invoked the Government of India (GoI) guarantee on February 6, 2020, and the interest as well as the principal were not funded in the designated account as on March 23, 2020.
Air India’s management has informed CRISIL that they have secured GoI guarantee to facilitate the refinancing of the entire principal amount of ₹700 crore to be repaid against the outstanding NCDs, and that the lender for the same has also been arranged. Besides, the management is also making arrangements for Air India to pay the interest related to the NCDs.
However, given the prevailing market environment due to the outbreak of coronavirus, there could be potential procedural challenges in the timely arrangement of funds. CRISIL could take further rating action in the event of further delays in receipt of funds in the designated account.
Once the designated account is funded for the upcoming interest and principal repayments, CRISIL will remove the rating on the ₹700-crore NCD from ‘watch’.