Meet to work out Air India's restructuring package today
28 November 2011
New Delhi: A meeting of government and airline officials and representatives of a consortium of bankers on Monday will try and resolve a financial restructuring package for financially embattled state-owned carrier Air India.
It is being given to understand that the debt-laden carrier may allot cumulative preferential shares, worth Rs7,000 crore, to various lender banks paving the way for it to restructure its working capital debts of Rs21,511.10 crore.
A cumulative preferential share does not provide any voting rights, nor is interest payment mandatory. Dividends may be issued but only in case of profits. In the case of lender banks they are helped by the fact that their loans need no longer be mentioned as non-performing assets (NPA) in their books.
A consortium of 22 banks, led by the State Bank of India, Bank of Baroda and the Bank of India, has provided working capital loans to Air India.
The meeting takes place with the Reserve Bank of India asking all concerned parties to move ahead with a restructuring package for the airline, after the government referred the matter to the apex bank.
The restructuring has to be implemented over the next four months.
The balance debt amount will get a longer moratorium period of 15 years for repayment against the current period of 10 years. The airline has to pay interest at the rate of 12-14 per cent on short term working capital loans, which results in an annual debt burden of over Rs2,600 crore.
Other proposals include extending the viability period for the airline from seven years to ten, a further equity infusion of Rs4,600 crore by the end of this fiscal and hiving off the Maintenance, Repair and Overhaul (MRO) unit and Ground Handling Units.