Saturday, December 01, 2018

Mounting liabilities: Government to repay Air India’s Rs 12,000 crore debt

Despite fiscal constraints, the Centre is likely to provide Rs 12,200 crore from the Budget — half of it this fiscal and the balance in the next year — to retire 40% of the Rs 30,000-crore working capital debt of Air India. As a precursor to this, the debt — not backed by assets — will be shifted to a special purpose vehicle (SPV). The SPV will service the balance debt of Rs 17,800 crore through monetisation of the carrier’s assorted assets. Another Rs 25,000 crore of AI debt, which are backed by aircraft assets, would be serviced by the carrier itself.

The whole exercise is expected to make AI more attractive in the eyes of potential suitors when the sale takes place in two-three years, sources privy to the formulation of the latest package told FE. These proposals would soon be vetted by the Cabinet, sources added.
The government had to drop a plan to privatise the debt-trapped national carrier due to lack of investor interest.  In order to service part of debt, the government-owned SPV would try to monetise the national carrier’s non-core assets including four subsidiaries, land and buildings along with artefacts. Besides, the SPV could also raise extra-budgetary resources (EBRs) to service the debt. The idea is to reduce the immediate burden on the exchequer.
After the takeover of the working capital debt, AI won’t receive any further budgetary support except the remaining `2,000 crore equity infusion under an ongoing turnaround plan (TAP), an official said. After failing to find a buyer for the airline earlier this year, the Centre has decided to first recast debt and monetise non-core assets before privatising AI and AI Express together.
01/12/18 Prasanta Sahu and Arun Nayal/Financial Express