A consortium of 19 banks, led by State Bank of India, has approved the financial restructuring plan of Air India. The plan, which includes debt restructuring of Rs18,000 crore (Rs180 billion) by the banks and a committed equity infusion by the government, will require Cabinet approval.
Of the Rs22,000-crore (Rs220-billion) high-cost working capital debt of the airline, banks will restructure nearly Rs18,000 crore (Rs180 billion) - Rs10,500 crore (Rs105 billion) will be converted into long-term debt with a repayment period of 10-15 years and the remaining Rs7,400 crore (Rs74 billion) approximately will be repaid to banks through a government-guaranteed bond issue.
'The restructuring plan has been approved by the banks and we hope Cabinet approval will come by the middle of April. That will help reduce our interest outlay substantially in the first year, as we get a moratorium on the loan for the first year,' said a senior Air India official.
The official said the amount of Rs7,400 crore would have a moratorium of 12 months and the Rs10,500 crore of six months. 'We will be able to save around Rs1,000 crore (Rs10 billion) immediately in the first year after the restructuring plan is implemented,' he added.
Air India has debt of over Rs43,000 crore (Rs430 billion) - Rs22,000 crore (Rs220 billion) short-term and Rs21,000 crore (Rs210 billion) long-term. It has an annual interest outlay of Rs2,700 crore (Rs27 billion). Of the Rs2,700 crore, Rs1,600 crore (Rs16 billion) goes to service working capital loans and the rest to service low-cost loans taken for aircraft acquisition.
In the second stage of the financial restructuring plan, the government has to infuse equity in the airline till 2020-21. A Group of Ministers ( GoM), headed by finance minister Pranab Mukherjee, had recommended an infusion of Rs23,000 crore (Rs230 billion) in the airline till 2020-21.
As part of the restructuring plan, the government announced in the Budget an infusion of Rs4,000 crore (Rs40 billion) in financial year 2013, raising the airline's equity base to Rs7,345 crore (Rs73.45 billion). The infusion is over and above the Rs3,200 crore (Rs32 billion) infused in the last two financial years.
The airline will utilise Rs4,000 crore (Rs40 billion) for its dues. It has to clear dues of Rs2,500 crore (Rs25 billion) to oil companies; Rs1,200 crore (Rs12 billion) is due to be paid to airport operators and Rs580 crore (Rs5.8 billion) in employees' salaries.
This is the second time that banks have approved a debt restructuring plan for Air India. In the plan approved earlier, banks had to convert Rs10,500 crore (Rs105 billion) of short-term loans into long-term and convert Rs7,400 crore (Rs74 billion) into equity shares.
The banks later objected to converting debt into equity in the carrier, as they were not sure about the company's revival and the FM had rejected any board-level representation for banks.
Air India has accumulated losses of over Rs20,000 crore (Rs200 billion). It is losing Rs15 crore (Rs150 million) a day.
The airline will utilise Rs4,000 crore (Rs40 billion) for its dues. It has to clear dues of Rs2,500 crore (Rs25 billion) to oil companies; Rs1,200 crore (Rs12 billion) is due to be paid to airport operators and Rs580 crore (Rs5.8 billion) in employees' salaries.
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Of the Rs22,000-crore (Rs220-billion) high-cost working capital debt of the airline, banks will restructure nearly Rs18,000 crore (Rs180 billion) - Rs10,500 crore (Rs105 billion) will be converted into long-term debt with a repayment period of 10-15 years and the remaining Rs7,400 crore (Rs74 billion) approximately will be repaid to banks through a government-guaranteed bond issue.
'The restructuring plan has been approved by the banks and we hope Cabinet approval will come by the middle of April. That will help reduce our interest outlay substantially in the first year, as we get a moratorium on the loan for the first year,' said a senior Air India official.
The official said the amount of Rs7,400 crore would have a moratorium of 12 months and the Rs10,500 crore of six months. 'We will be able to save around Rs1,000 crore (Rs10 billion) immediately in the first year after the restructuring plan is implemented,' he added.
Air India has debt of over Rs43,000 crore (Rs430 billion) - Rs22,000 crore (Rs220 billion) short-term and Rs21,000 crore (Rs210 billion) long-term. It has an annual interest outlay of Rs2,700 crore (Rs27 billion). Of the Rs2,700 crore, Rs1,600 crore (Rs16 billion) goes to service working capital loans and the rest to service low-cost loans taken for aircraft acquisition.
In the second stage of the financial restructuring plan, the government has to infuse equity in the airline till 2020-21. A Group of Ministers ( GoM), headed by finance minister Pranab Mukherjee, had recommended an infusion of Rs23,000 crore (Rs230 billion) in the airline till 2020-21.
As part of the restructuring plan, the government announced in the Budget an infusion of Rs4,000 crore (Rs40 billion) in financial year 2013, raising the airline's equity base to Rs7,345 crore (Rs73.45 billion). The infusion is over and above the Rs3,200 crore (Rs32 billion) infused in the last two financial years.
The airline will utilise Rs4,000 crore (Rs40 billion) for its dues. It has to clear dues of Rs2,500 crore (Rs25 billion) to oil companies; Rs1,200 crore (Rs12 billion) is due to be paid to airport operators and Rs580 crore (Rs5.8 billion) in employees' salaries.
This is the second time that banks have approved a debt restructuring plan for Air India. In the plan approved earlier, banks had to convert Rs10,500 crore (Rs105 billion) of short-term loans into long-term and convert Rs7,400 crore (Rs74 billion) into equity shares.
The banks later objected to converting debt into equity in the carrier, as they were not sure about the company's revival and the FM had rejected any board-level representation for banks.
Air India has accumulated losses of over Rs20,000 crore (Rs200 billion). It is losing Rs15 crore (Rs150 million) a day.
The airline will utilise Rs4,000 crore (Rs40 billion) for its dues. It has to clear dues of Rs2,500 crore (Rs25 billion) to oil companies; Rs1,200 crore (Rs12 billion) is due to be paid to airport operators and Rs580 crore (Rs5.8 billion) in employees' salaries.
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