The Hindu Business Line : SPV set up in Cayman Island for Indian's aircraft buy

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New Delhi Feb. 23 German banks KfW and H.S. Nord, from which Indian has tied up financing for the first batch of 10 Airbus A-320 aircraft, have set up a Special Purpose Vehicle (SPV) in Cayman Island for the transaction.

The SPV, called Bayern Incorporated, has been created to enable collateral for the loan that has been taken, official sources said. The banks will lend $500 million to Indian, which is to be paid back over 12 years. ``The bankers were keen that the SPV be set up in a neutral territory, therefore Cayman Island was chosen," the sources added.

The airline, which has signed a deal to purchase 43 Airbus aircraft at an estimated value of more than $2 billion, is to receive 10 Airbus aircraft from June.

Although itis to acquire 43, the SPV is currently only for the first tranche of 10.

Sources indicated that setting up an SPV was the normal way for structuring the loans for such transactions.

Rupee financing

Meanwhile, the airline would look to tie-up rupee financing from Indian banks for the remaining aircraft.

"If the airline was to tie-up rupee financing for purchase of the remaining aircraft, then it would have to follow procedures that are similar to what a company has to do when approaching a bank for a loan for setting up a factory here. This would do away with the necessity of setting up an SPV," the sources said.