Air India looks to issue bonds for Rs5,500 crore
17 May 2011
New Delhi: In a bid to restructure its long-term debt, struggling state-owned carrier, Air India, said Monday it was seeking permission from the ministry for civil aviation to issue bonds worth Rs5,500 crore to a consortium of banks.
Senior airline officials said such a proposal was sent to the ministry a week back.
The airline seeks to raise about Rs5,500 crore by issuing 15-year bonds. Fresh capital would help ease working capital requirements of the badly struggling carrier apart from helping it restructure long-term debts.
It would also allow the carrier to increase its savings as it would ease the interest burden it carries because of Rs40,000 crore in loans that it has taken on for aircraft acquisition and working capital requirements.
Air India's cumulative interest per annum amounts to Rs3,200 crore, including Rs1,800 crore on 111 aircraft ordered since 2006.
Under a plan, recently presented to a consortium of lender banks by global consultancy firm Deloitte and SBI Caps, the flag carrier can potentially save around Rs900 crore on interest payment by converting 60 per cent of its short-term loans, on which it pays anywhere around 10 to 12 per cent interest, to long-term loans with lower interest rates.
The badly bleeding flag carrier has already received fresh equity infusion of Rs2,000 crore (around $450 million) last year from the government and is set to receive another Rs1,200 crore ($250 million) this year.