Air India seeks bridge loan of $500 million

Air India is in quest of a ‘Bridge Loan’ of up to $500 Mn to take delivery of 4 Boeing 787 Dreamliner aircrafts between May and November 2014 from an on-going order. For this, Air India has invited offers from banks to arrange the bridge financing for a period of 6-12 months. Air India is offering the aircraft as security and will pay back the loan following its conclusion of a sale and lease-back arrangement.
[icon name=”icon-question-sign”]What is a “Bridge Loan”?
Bridge Loan (also called Bridge Finance, Bridging Loan, or Gap Financing) is a short-term (usually less than a year) loan taken to cover the period between the expiry of one loan and the beginning of another loan. Bridge loan is arranged mostly to accomplished a purchase (viz. a new house, aircrafts) before the borrower gets payment from a sale (of the old house, old aircraft), or before a long-term loan is made accessible upon completion of its requirements.
Bridge loans are normally more costly than normal financing, to pay off for the extra risk. The lender also may demand cross-collateralization and a lower loan-to-value ratio. On the other hand Bridge Loans are generally arranged rapidly with comparatively little documentation.

Month: Current Affairs - April, 2014