A consortium of 17 banks have agreed to a restructuring package for Air India where Rs 20,000 crore of short term working capital loans will be converted into longer duration term loans and part of this money will be converted to unsecured credit that the government will repay.
The repayment period of the loan has been extended by 10 years with a corporate guarantee from the Government of India and hypothecation of aircraft with the instalment beginning within two years. The government on its part is expected to infuse Rs 20,000 crore into the airline and take care of the unsecured debt obligations of the airline. Interest rate of about at least 2 per cent concessions will part of the package. Air India accounts with all the banks are “standard”.
A senior banker who has been part of the negotiations said, “In return, Air India has told banks that it will generate revenues by putting its huge hangar facilities to optimum use by carrying out repair and servicing activities for other airlines, put its hotels to use for catering services in-flight meal services and optimum utilisation of its aircraft."
SBI Caps, the agency appointed by Air India, submitted the proposal to the Reserve Bank of India last week for its comments and has sought special dispensation for the Air India whereby RBI will allow banks to do the provisioning over a period of three to four quarters or waive off the provisioning requirement so that it will not impact the bottom line of banks who are part of the restructuring.
Rohit Nandan, Air India’s chairman and managing director, told Financial Chronicle, “We have asked for restructuring of all Rs 44,000 crore including Rs 20,000 crore on aircraft purchase.”
13/11/11 Manju AB & Rupesh Subhash Janve/mydigitalfc.com
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