Deccan Aviation - Term Sheet; Innovative Financial Structure

With reference to the earlier announcement dated September 22, 2006 regarding the approval by the Board of Directors of the Company, of the Term Sheet in respect of Financial Structure, for US $ 100 mn, Deccan Aviation Ltd has announced that the documentation process and the transaction has been concluded. The salient features of this transaction are as follows:

1. Air Deccan, the Airline Operations of the Company has placed orders for purchase of 60 Airbus A-320 aircraft with IAE engines.

2. Pre-delivery Payments (PDP) for the aircrafts have been funded by Indian Public Sector Banks for which Security assignment has been provided.

3. Air Deccan has assigned the aircraft purchase contract in favour of a special purpose Company controlled and funded by a consortium of European Banks for a consideration of USD 100 million payable to Air Deccan in four tranches over a period of 15 months subject to compliance of prescribed financial covenants.

4. Air Deccan retains the right to acquire the aircraft at the time of delivery and in the event of Air Deccan not taking delivery of the Aircrafts, the special purpose Company has the right to market the aircraft and satisfy the PDP lenders and recover its investments.

5. The first tranche of USD 30 million out of the USD 100 mn has been received.

Further the Company has informed that, this transaction is expected to provide a cash flow of approx Rs 450 Crores (USD 100 mn) over a period of 15 months and contribute to the profits of the Company, subject to compliance of certain financial covenants. This will also help the Company in developing a relationship with European Bank for aircraft funding.

Source : Equity Bulls

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