Delhi International Airport keen on bond issue to repay bank loans

MUMBAI: Delhi International Airport (DIAL) is among a growing list of companies that want to pay bank loans before term and shift to cheaper market borrowing. The company plans to raise more than Rs 1,000-1,500 crore from the bond market to repay a portion of its high-cost loans, two senior bank executives told ET.

Money raised through this route will be 150 to 200 bps lower than the bank rates. "The company has approached banks for a no-objection certificate to raise money through private placement of bonds," said an executive. The bank pays an annual interest of 11.5 per cent to its lenders.

A DIAL spokesperson said, "The points raised are speculative in nature and as a policy we do not comment on speculative news." While banks have lowered their base rate in recent weeks by 25 to 40 basis points, the bond market continues to be a cheaper source for borrowing. For instance, a triple-A-rated corporate can raise money at 8-8.25 per cent from the bond market, lower than State Bank of India's base rate of 9.30 per cent.

Even SBI MD B Sriram had said soon after the RBI announced a 50 bps rate cut last week "the rates in the corporate bond market will be lower than whatever banks will pass on to customers. But the point is only better-rated customers can tap the bond market."

DIAL, which commenced operations in 2010, is a joint venture of the GMR Group that holds a 64 per cent stake through GMR Airports, AAI (26 per cent) and Frankfurt Airport Services Worldwide (10 per cent).

Care upgraded the rating of the company from A to AA recently on the ground that it derives strength from the presence of a structured payment mechanism (SPM) ensuring collection of development fee receipts and servicing of rated debt through designated escrow accounts.