Even as 30,000 plus employees of Air India set out to wear black arm bands to draw attention to the financial problems in the national carrier, the airline officials expect its lenders to clear the debt restructuring proposals which will reduce the airline's yearly debt burden by Rs 1,400 crore.
“From what we are given to understand, the consortium of bankers is going to clear the debt restructuring plan,” an Air India official told Business Line. However, the official did not give a timeline as to when the restructuring plan will be cleared.
committee
Air India's debt restructuring plans have also got a shot in the arm with the Ministry of Civil Aviation deciding to set up a committee to look at the debt restructuring plan and a turnaround plan for the airline. The committee will give its recommendations within six weeks following which a Group of Ministers will examine it.
According to the Civil Aviation Ministry officials, banks are being very “helpful” to put the airline back on its feet.
The debt restructuring plan would help in reducing the airline's debt to equity ratio to 1:5 as well as reducing the airline's yearly debt repayment burden by Rs 1,400 crore. The airline has total loans of Rs 40,000 crore including Rs 22,000 short term loans.
The annual interest cost of these loans is Rs 2,400 crore for the short term loans and Rs 1,000 crore for the long-term loans, according to airline officials.
Air India is looking at converting 60 per cent of its working capital into 10 or 15-year loans with an interest rate of 10.5 per cent. The remaining loan will be converted into 15-year cumulative redeemable preference shares with a fixed coupon of 8.5 per cent along with a government buy-back guarantee.
The working capital loan was mostly extended by State-run banks such as State Bank of India, Punjab National Bank, IDBI Bank and Syndicate Bank amongst others.