Air India lenders undecided on debt restructure

Lenders to Air India on Thursday were unable to reach a decision on the ailing national carrier's $4 billion debt restructuring, three sources with direct knowledge of the matter said, further delaying the airline's long-pending proposal.

Last week, the lenders -- a consortium of 13 banks led by State Bank of India (SBI) -- deferred Air India's debt restructuring proposal, seeking a revision as they were reluctant to accept equity in the airline.

One of the options discussed by the banks on Thursday was to convert the airline's debt into a government-backed bond, the sources said.

The bonds will have the status of a security approved for maintenance of the statutory liquidity ratio (SLR). SLR is the proportion of deposits that banks need to invest in government debt and other approved securities.

The lenders are expected to give their views on the various options discussed by Monday, two sources said.

After arriving at a decision, the banks would need approvals from the government and the Reserve Bank of India, which could take a few more months, the sources said.

"We discussed 15-20 options today. The ultimate objective is to see if we have any better option than converting debt into equity," one of the sources said.

"We will go back and study each of these options. Today it was only brainstorming," he added.

Air India could not immediately be reached for comment when contacted by Reuters.

Another loss-making Indian carrier, Kingfisher Airlines, had last year given its lenders a near 25% stake as a part of its debt restructuring.

Kingfisher is now in talks with Hong Kong-based distressed debt firm SC Lowy Financial for a possible investment.

Air India's restructuring proposal is being prepared by SBI Capital Markets, the investment banking arm of the country's biggest lender SBI.