AVIATION
Nepal Airlines looking for Soft Loan and Financing from global lenders
Despite the challenges, Nepal Airlines remains optimistic about its future, citing the necessity for new planes and the potential relief of lowering the existing loan.
National Flag Carrier Nepal Airlines Corporation, which is facing a high level of debt, has requested $1.01 billion (Rs135 billion) in financing from international lenders. The airline has invited proposals from potential lenders, and the deadline for submission is March 7. This is the largest loan ever sought by a Nepali company from international sources.
The funds are intended for various purposes, including managing existing loans, purchasing aircraft, and setting up a hangar. The airline aims to secure better terms, such as a lower interest rate of less than 5 percent per annum from international lenders, to replace its existing high-interest domestic loans.
The proposal outlines two financing options to mitigate foreign exchange risk. Lenders can provide funds in Nepali rupees with repayment in the same currency, or in US dollars at a fixed exchange rate. The government or finance ministry may need to act as a guarantor since the airline lacks collateral.
The Finance Minister, Prakash Sharan Mahat, expressed unawareness of the development and emphasized the need for Nepal Airlines to restructure before expansion. The airline has a history of financial scandals, mismanagement, and corruption, leading to its current financial struggles.
Despite the challenges, Nepal Airlines remains optimistic about its future, citing the necessity for new planes and the potential relief of lowering the existing loan interest rate to 5 percent. The airline’s financial reports show revenue from various sources, including ground handling services, with plans to sell off older Chinese planes that have become a financial burden.
Nepal Airlines in process of acquiring Soft Loan
The Nepal Airlines Corporation has decided to explore the option of obtaining a Soft Loan, which is a loan with a lower interest rate compared to regular loans. The purpose of seeking this Soft Loan is to reduce the burden of interest expenses while acquiring A-320 and A-330 aircraft for international flights. In a report presented by the Corporation’s management to facilitate the Loan Swap – a process aimed at exchanging high-interest loans with lower-interest ones – it has been recommended to seek the approval for obtaining a Soft Loan from the government.
The decision for seeking this Soft Loan was made in a meeting chaired by Mr. Yubaraj Adhikari, the Chairman of the Management Committee of the Corporation, held on February 25, 2080 (Nepali calendar). Following the decision, a formal Expression of Interest (EOI) was announced on January 23, 2024, inviting potential lenders for the purpose of obtaining Soft Loan amounting to Rs135 billion. This move aligns with the directives received from the Ministry of Culture, Tourism, and Civil Aviation, the Ministry of Finance, and the Nepal Bank, as coordinated in accordance with the necessary guidelines.