Air India set to get relief from short-term debt

New Delhi: India will soon get rid of high-cost debt. The banks to which it owes money are discussing a proposal to convert 60 per cent of the Rs 18,000-crore short-term debt into long-term debt. The rest will be converted into Compulsorily Convertible Preference Shares (CCPS).
With this, the national carrier’s annual debt repayment burden will come down by around 42 per cent to Rs 700 crore from Rs 1,200 crore.
“The proposal to convert 60 per cent debt into long-term debt and the rest into CCPS is being considered. We will approach the airline soon,” said a Mumbai-based bank official, who did not want to be identified.
He added that the existing loans had a tenure of one year or less. This will be increased to 10 years with a one-year moratorium on payment of the principal amount, according to the proposal.
“The rest will be converted into CCPS for a long-term period,” said the banker.
Out of the Rs 40,000-crore debt, the working capital debt is Rs 22,000 crore. The rest are long-term loans taken to fund aircraft acquisition. The working capital debt has a high cost, with an average interest rate of 12 per cent.
After the proposal is finalised, it will go to the Reserve Bank of India and then the government. The national carrier has to submit a detailed proposal to the civil aviation ministry by April 15.
Air India has taken loans from a consortium of 20 banks. The banks with the highest exposure to the airline are Punjab & Sind Bank, Bank of Baroda, State Bank of India and IDBI Bank.
11/04/11 Business Standard

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Categories: Air India Apr 2011