Lenders want govt to pay for AI's plane purchases

New Delhi: Lenders led by State Bank of India (SBI) have agreed to restructure the debt of state-owned Air India (AI), but with stiff riders.
First, they have demanded that the government fund Air India’s aircraft acquisition plan by injecting fresh equity.
The government has till now injected Rs 2,000-crore fresh equity into the airline. But the lenders and the company have veered around to the view that it needs to put in another Rs 8,000 crore to execute the turnaround plan. Out of this, the government has already committed Rs 1,200 crore.
The management must commit to 14% annual revenue growth over the next 10 years
It should take severe cost-cutting measures and spin off businesses
In return, the banks will convert working capital loans into long-term debt and compulsorily redeemable preference shares
The banks have also sought a commitment from the management that the airline’s revenue will grow by at least 14 per cent every year for the next 10 years. They also want cost-cutting measures and spinning off of businesses, as envisaged in a report prepared by Deloitte. At present, the airline’s revenue is growing 13 per cent per annum.
In return, the lenders have agreed to convert the Rs 21,200-crore working capital loan into long-term debt. Of this, Rs 11,000 crore will be converted into long-term debt, to be paid over ten years, while the remaining will be converted into compulsorily redeemable preference shares.
24/06/11 Surajeet Das Gupta/Business Standard

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Categories: Air India Jun 2011