New Delhi: Air India is negotiating with lenders to convert Rs 10,000 crore of its debt into equity, a move that will substantially reduce the national carrier's interest burden but give the banks a major say in its functioning. Air India chairman Ashwani Lohani has already met a few bank heads to discuss the matter and will meet some more in the coming days, said a senior official at the state-run airline who is involved in the talks with the 19-member consortium of lenders.
The talks are being held under the Reserve Bank of India's Scheme for Sustainable Structuring of Stressed Assets, or S4A, which gives struggling companies another chance at recovery.
Under this programme, unsustainable loans — the portion of the debt that can't be serviced through existing cash flow — can be converted into equity with the banks holding the stake. "About Rs 20,000 crore of our loans have been found to be sustainable (which can be serviced through its cash flow) and about Rs 10,000 crore is (proposed) to be converted into equity," said the official, speaking on the condition of anonymity.
"SBI Caps is negotiating for us with the consortium of 19 banks." The national carrier pays Rs 4,000 crore of interest a year. "Once these loans are converted into equity, our annual interest payment outlay will reduce by Rs 1,000 crore," he said. A lower interest outgo will boost the airline's efforts to turn a profit.
22/08/16 Mihir Mishra/Economic Times
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The talks are being held under the Reserve Bank of India's Scheme for Sustainable Structuring of Stressed Assets, or S4A, which gives struggling companies another chance at recovery.
Under this programme, unsustainable loans — the portion of the debt that can't be serviced through existing cash flow — can be converted into equity with the banks holding the stake. "About Rs 20,000 crore of our loans have been found to be sustainable (which can be serviced through its cash flow) and about Rs 10,000 crore is (proposed) to be converted into equity," said the official, speaking on the condition of anonymity.
"SBI Caps is negotiating for us with the consortium of 19 banks." The national carrier pays Rs 4,000 crore of interest a year. "Once these loans are converted into equity, our annual interest payment outlay will reduce by Rs 1,000 crore," he said. A lower interest outgo will boost the airline's efforts to turn a profit.
22/08/16 Mihir Mishra/Economic Times
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