"The company has not dumped its plans for the bond issue. The issue, which was planned in November, will materialise only in January," sources handling the issue said. ICICI-Securities has been appointed the lead manager to the Rs 50-crore issue, which will have a greenshoe option of another Rs 50 crore. "The main cause of delay is because of the company taking time to obtain approvals at various levels both in the company end as well as the government side," sources said.

Sources said that the structure of the bond issue is yet to be finalised but the tenure is likelyto be a five- to seven-year bond issue. "Nothing has been finalised on the rate structure," sources said. Initially, it was proposed that an escrow account would be floated for the success of the bond issue. Air India has persistently refused to get the bond rated while the government has refused to provide a guarantee to the issue. This had led to fears that investors like banks would stay away from subscribing to the issue. SBI Capital had refused to place the issue describing it as a "junk bond".

Air India is also considering various financial options which include raising $200 million through a securitisation deal which is being handled by ABN Amro and selling its stake in Hotel Corporation of India.

INSIGHT

Move will worsen matters: That Air India requires a fresh induction of funds and quickly is well known. However, the possibility of the government pumping in Rs 1,000 crore for its revival and giving its consent for a strategic partner without bureaucratic wrangle (which willinduct another Rs 770 crore) appears bleak.

The postponement of the bonds issue will definitely complicate financial matters further for the airline. As is clearly reflected in the company's precarious financial position, highlighted by total short-term borrowings in excess of Rs 1,100 crore for 1997-98 and a debt-equity ratio of 4.99:1. Also given the increasing global tie-ups and load sharing agreements being worked out by other airlines, Air India is fast being relegated to the role of a regional player.