Banks seek debt recast for airlines

India’s banking industry led by State Bank of India (SBI), the nation’s largest lender, wants to recast the ballooning debt of domestic airlines, throwing the ailing carriers a lifeline while protecting its own loans from turning sour.
The three large airline groups—Air India, Jet Airways (India) Ltd and Kingfisher Airlines Ltd—have a combined debt of around $10 billion (Rs46,500 crore today), according to a report by the consulting firm Centre for Asia Pacific Aviation (Capa) released in December.
Banks need to set aside money to cover bad debts, denting their profitability. A recast of the loans would forestall the need for banks to make such provisions.
“Banks have sought a special dispensation package for the loans granted to beleaguered airlines, citing poor financial health, capital intensity of the sector and long gestation period (in breaking even or turning profitable),” said a senior Mumbai-based banker whose organization has lent to airlines.
The request for a special dispensation followed the Reserve Bank of India (RBI) rejecting a proposal by SBI to recast a loan of around Rs2,000 crore given to Kingfisher Airlines, the second largest carrier by passengers carried, according to a second banker. Kingfisher Airlines reported a net loss of Rs1,647.22 crore for the fiscal ended March.
28/06/10 Anup Roy & P.R. Sanjai/Live Mint

To Read the News in full at Source, Click the Headline

Categories: Indian Aviation- In General Jun 2010