Air India seeks debt recast nod

Mumbai: National carrier Air India has sought approval from the Reserve Bank of India (RBI) to convert a major portion of its Rs18,000 crore of working capital loans into term loans with a moratorium of two to three years on principal repayments as part of a financial restructuring plan.
Air India and SBI Capital Markets Ltd, or SBICaps, an arm of State Bank of India representing a consortium of banks, have approached RBI with the proposal, according to two persons familiar with the development. One of them is a senior banker and the other a senior official at the ministry of civil aviation.
The bank consortium has approached RBI to restructure the debt of Air India, after they have done so for Kingfisher (Airlines Ltd). Options they are evaluating to carry out the plan include extending the term of the loan and permitting a moratorium,” a senior SBICaps official, who did not want to be named, said.
Air India has accumulated losses of Rs14,000 crore in the last four fiscals and has total debt of Rs40,000 crore, including the Rs18,000 crore of working capital loans. If RBI agrees to the proposal, Air India will be able to reduce the interest rate on its working capital loans to 6-6.5% from 12%, reducing its debt servicing burden.
“Conversion of working capital loans to term loans will make it easier for the airline to repay its debts,” said Hatim Broachwala, a research analyst at Mumbai-based Khandwala Securities Ltd. “The restructuring exercise will be positive for banks as it improves the chances of (loan) recovery.”
31/10/10 P.R. Sanjai & Dinesh Unnikrishnan/Live Mint

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Categories: Air India Nov 2010