Banks want better terms for Air India debt recast

Mumbai: Lenders to cash-strapped Air India are not happy with the debt restructuring plan formulated for the airline by merchant banker SBI Capital Markets Ltd (SBICaps), and some of them say they may insist on an early exit.
SBICaps, the investment banking arm of State Bank of India (SBI), presented the plan to select banks a fortnight ago. It has proposed a “deep restructuring” of Air India’s working capital and other short-term loans.
This includes converting Rs20,000 crore of loans into term loans of 10-20 years at a reduced interest rate.
Bankers are looking for a definitive “exit clause” from Air India.
Incidentally, a consortium of 13 lenders, including SBI and ICICI Bank Ltd, recently bought a 23.21% stake in Kingfisher Airlines Ltd, stopping short of gaining more say in the airline with a slightly enhanced holding. SBI picked up a 5.67% stake and ICICI Bank, 5.3%. Kingfisher Airlines, India’s second largest by passengers carried, converted Rs.750 crore of its total debt of Rs7,000 crore into equity at a 61.6% premium over its share price. It allotted shares to lenders on 31 March at Rs64.48 a share. The lenders will get one seat on the carrier’s board. It is not clear why they did not pick a 26% stake in the carrier, which would have given them more powers in terms of the right to block special resolutions and more board seats.
27/04/11 P.R. Sanjai & Anup Roy/Live Mint

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Categories: Air India Apr 2011