Air India and its lenders group have finally signed a financial restructuring plan that would help the beleaguered national carrier save hundreds of crores of rupees in working capital expenses and give a big boost to its precarious finances.
The debt restructuring plan involves conversion of about Rs10,500 crore of the airline's Rs14,000 crore working capital loans to long-term debt, carrying an annual interest of 11 per cent.
Part of the working capital of about Rs3,500 crore will also be restructured as cash credit arrangement.
Air India will also be issuing Rs7,400-crore worth of non-convertible debentures (NCDs), guaranteed by the government, to investors, which would be used to repay loans.
The first year interest would accumulate in a funded interest term plan, leading to savings of about Rs1,000 crore in 2012-13 itself, sources at the banks said.
In all, Air India signed four agreements with the consortium of lenders led by the State Bank of India (SBI) late last evening after the lenders approved the comprehensive operational turnaround plan along with a financial restructuring, civil aviation minister Ajit Singh said.