Air India to allot cumulative preferential shares to lender banks

New Delhi: The debt-laden national carrier Air India will allot cumulative preferential shares worth Rs 7,000 crore to various lender banks. This will help the banks to restructure its short term working capital debt of Rs 21,511.10 crore.
A cumulative preferential share is a kind of debt instrument. It does not give any voting right or right to sit on board as a shareholder. No interest is required to be paid. Such an instrument does get dividend, but only when the company turns profitable.
On the other hand, the allotee banks will not be required to mention this as non performing assets (NPA) in their books. So, it is a win-win situation for both Air India and the lender banks, a person familiar with the development said. A consortium of 22 banks, including SBI, Bank of Baroda and Bank of India, have provided working capital loan to Air India.
“The Government, the airline and the consortium of bankers will meet on Monday to seal the debt restructuring package. Accordingly, the proposal will be finalised,” a top government official told Business Line. This meeting has been called after the Reserve Bank of India gave a conditional nod for restructuring of Air India's debt last week. The restructuring has to be completed in the next four months.
27/11/11 Shishir Sinha/Business Line

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Categories: Air India Nov 2011