Mumbai: Senior officials of India's state-owned carrier are relying on the might of the state to compel reluctant banks to agree to the terms of a debt restructuring plan under which 40% of loans will be converted into a type of equity known as preference shares while interest rates will come down on the rest.
On April 8, in a decision that has not been publicly announced, the board of Air India, the debt-laden government-owned carrier, had given its preliminary approval to a plan under which 60% of its high interest working capital loan of 20,000 crore will be converted into a long-term loan at a reduced rate, while the rest will morph into cumulative preference shares which the government will buy back. The approval is subject to the consent of the lenders.
Predictably lenders, including SBI, Central Bank , Bank of India , HDFC , Punjab National Bank and Bank of Baroda , are unhappy at the massive haircut. Thy have had a number of meetings with the airline's top management to find common ground, so far without much success.
"The Air India board has approved the proposal. However, lenders are yet to clear the proposal. Lenders are of the view that the promoter should bring in more capital. They are also not happy with the business projections laid out by Air India," said a senior banker involved in the negotiations.
13/05/11 Manisha Singhal/Economic Times
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