SBI leads banks on tri-strategy for airline debt

Mumbai: Based on Reserve Bank of India (RBI) instructions, State Bank of India, the country’s largest lender, and its merchant banking arm, SBI Caps, have prepared the broad contours of a much-awaited debt restructuring package for the aviation sector.
The RBI suggestions include conversion of short-term loans into long-term credit, additional equity infusion by airline promoters and partial conversion of outstanding debt into equity and preference capital. Though preliminary, it will set the agenda for further discussions among the top 13 banks who have the highest lending exposure to the cash-strapped sector.
It is expected that these initiatives will provide major relief for the sector’s ballooning debt. And, especially, help the three biggest carriers -- Air India, Kingfisher Airlines and Jet Airways. Between them, they control 65 per cent of domestic passenger traffic but have a combined debt of Rs 63,045 crore ($13.5 billion).
Three independent bankers privy to the developments told Business Standard that late last week, at a meeting in SBI, these points were discussed in detail among the 13 top lenders. The meeting discussed only the debt restructuring package of Kingfisher Airlines at length but the bankers believe it will set the basis for the bigger sectoral package.
19/07/10 Arijit Barman & Abhijit Lele/Business Standard

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Categories: Indian Aviation- In General Jul 2010