AI embarks on fiscal revamp

Mumbai: Ailing national carrier Air India is in the process of restructuring its borrowings through a series of initiatives that could cut its interest costs by one-third and ease the way to to another round of equity infusion from the government.
The debt plan includes securing a government guarantee that will help it renegotiate the interest rate it pays banks for working capital loans, closing old loans and replacing them with new ones contracted at lower interest rates besides raising funds through a global competitive tender, said two Air India executives.
Air India is run by the government-owned National Aviation Co. of India Ltd, or Nacil, and needs equity capital from its owner to reduce its financial leverage. The government has already put Rs945 crore into Air India, most recently through two infusions totalling Rs800 crore in February and March, and has said that further help will depend on the ability of the airline to put its finances in order and cut costs. Air India till recently had borrowings of Rs16,000 crore on equity capital of Rs145 crore.
“We are expecting at least Rs750 crore a year in interest cost savings,” said one of the Air India officials, who requested anonymity because he is not authorized to speak to the media. The airline’s total interest costs in 2009-10 were Rs2,400 crore.
To start with, Air India is expecting a letter of comfort, a form of sovereign guarantee, by end-April to help it reduce working capital loans which amount to Rs16,000 crore.
02/10/03 P.R. Sanjai/Live Mint

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Categories: NACIL Apr 2010