March 20 - Fitch Ratings has affirmed Air India Charters Limited's (AICL) INR950m non-convertible debentures (NCDs) at 'Fitch AAA(ind)(SO)'.
The rating reflects the absolute, unconditional and irrevocable guarantee extended by the Government of India (GoI, Issuer Default Rating: 'BBB-'/Stable) for timely repayment of both principal and interest. The rating is further supported by the guarantee structure, which ensures timely debt servicing. The guarantee is legal, valid and binding even in the event AICL turns insolvent and files for protection under the Sick Industrial Companies Act or any similar legislation.
The NCDs were issued on 26 March 2010 and have a 10-year tenor, with principal redemption as a bullet repayment at maturity. Interest payments are made bi-annually on 31 March and 30 September. AICL has opened a no-lien trust and retention account (TRA) with Standard Chartered Bank to meet its bond obligations.
The TRA bank statements confirm that AICL has been timely funding the account to adequate extent since September 2010 as per the terms of the guarantee structure.
Fitch notes that failure of the GoI to meet timely obligation on invocation of the guarantee, non-compliance of the payment mechanism for repayment of the rated instrument, and any change in the GoI's policy that provides protection to AICL from its creditors in case of its insolvency will lead to a ratings downgrade.
AICL is a GoI enterprise and 100% subsidiary of Air India Limited's (AIL). The latter reports to the Ministry of Civil Aviation, GoI. AICL has 21 aircrafts -17 owned and four on finance lease. For the financial year ended 31 March 2011 (FY11) AICL reported operating revenues of INR13,112.8m (FY10: INR13,453.5m) with an EBITDA loss of INR125m (an EBITDA loss of INR338.3m). As at FYE11, it had total debt of INR36,761.5m (FYE10: INR38,722.9m).