Air India to issue NCD with govt guarantee to repay part of short-term debt

New Delhi: Government-owned Air India’s debt restructuring proposal was cleared by the Group of Ministers (GoM) on the issue on Tuesday. The Cabinet has to now approve this.
Banks are restructuring around Rs 18,000 crore of the Rs 24,000 crore short-term debt of the carrier. AI will issue non-convertible debentures (NCD) to raise Rs 7,400 crore and use the money to repay a part of its short-term debt. The rest will be converted into long-term debt, to be repaid in 10-15 years, at an interest rate of 11 per cent. The bond will have a government guarantee and a maturity period of 20 years. The coupon rate will be slightly above that for government securities, said a senior AI official.
“The banks were to convert a part of our debt into equity. We will repay (part of) our debt with the money raised through bonds and the banks will not have to take a major hit. Around 15 banks will have to make a provision of around Rs 2,160 crore over a period of 20 quarters,” said a senior AI official.
The restructuring had hit a hurdle after banks refused to convert a part of the short-term debt into preference shares. According to the earlier plan, they were to restructure Rs 18,000 crore of the Rs 24,000 crore short-term debt. Of this amount, banks will convert Rs 11,000 crore to long-term debt with a repayment of 10 to 15 years. They will convert the remainder, around Rs 7,000 crore, into cumulative redeemable preference shares.
08/02/12 Business Standard

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Categories: Air India Feb 2012