Air India debt restructuring to put Rs2,000 cr burden on 14 lenders

Air India's debt restructuring will impose a burden of Rs2,000 crore on the consortium of 14 lenders, said a senior finance ministry official in Delhi on Wednesday.

"There will be a hit of Rs2,000 crore on the bottom lines of 14 banks due to lower returns and higher provisioning requirements," the official said.

A Group of Ministers (GoM) led by Finance Minister Pranab Mukherjee had on Tuesday allowed Air India to raise Rs7,400 crore by issuing government-guaranteed bonds or by other means. The approval is subject to Cabinet clearance.

The official, however, said that the banks will not have to write down loans extended to the cash-strapped carrier.

The bond is likely to carry a coupon rate of 8.5-9 per cent and financial institutions may subscribe to these bonds, official sources said, adding this would be part of the national carrier's financial restructuring plan.

Official figures show the debt-ridden carrier has outstanding loans and dues worth Rs 67,520 crore, of which Rs 21,200 crore is working capital loan, Rs 22,000 crore is long -term loan on fleet acquisition, Rs 4,600 crore is vendor dues besides an accumulated loss of Rs 20,320 crore.

Banks and financial institutions had proposed several measures to beef up Air India's networth and these were among the measures approved by the GoM, the sources said.

Air India's debt restructuring plan had hit a hurdle after the banks had refused to convert a part of the short-term debt into equity.

As per the earlier plan, the banks were to restructure a debt of Rs18,000 crore, of which around Rs10,500 crore would have had to be converted into long-term with a repayment period of 10-15 years and the rest was to be converted into equity by banks. The banks had raised objections to this.

This situation had prompted the GoM to permit Air India to raise resources through bonds or non-convertible debentures, the sources said.