Bankers, AI management to hold meeting tomorrow

A solution to Air India's problem of servicing its huge debt burden may come about soon with the bankers consortium and the airline management holding a meeting in Mumbai tomorrow.

"We will be meeting the bankers' consortium tomorrow. We will have to see what is the debt and how much is to be converted and how that is to be done," Air India CMD Arvind Jadhav told PTI here.

The airline is saddled with a debt of about Rs 40,000 crore of which Rs 18,000 crore is working capital loans taken from a consortium of banks, while the balance Rs 22,000 crore worth of loans is towards payment of new aircraft ordered.

Replying to questions, Jadhav said, "If the government does it (servicing debt), then there is no problem. But if we have to service our debt on our own, then we have to work with the financial institutions. The government and the FIIs have to be on the same page".

The ailing national carrier had last month accepted a corporate debt restructuring (CDR) package that was first prepared by SBI Caps and then vetted by global consultancy firm Deloitte. The package was approved after several rounds of consultations with banks and the government.

"We are going to meet the banks consortium and will soon announce the details," Jadhav said.

Last December, Air India had appointed Deloitte to vet the SBI Caps-prepared financial restructuring plan before it was submitted to the Reserve Bank of India for approval.

If the RBI agrees to the proposal, Air India will be able to reduce the interest rate on its working capital loans to 6-6.5% from the present 12%, thereby considerably reducing its debt servicing burden.

An official said that as of now, there was no limit on the amount of loan to be converted, but "we would want maximum conversion".

The airline has so far raised loans worth around Rs 14,000 crore to fund aircraft purchases and is currently in the process of raising more money. The working capital loan was mostly extended by state-run banks like SBI, PNB, IDBI Bank and Syndicate Bank.

The working capital debt of Rs 21,000 crore was borrowed at an interest rate of 12 per cent. The airline's annual interest payment was Rs 1,800 crore on a debt of Rs 40,000 crore -- Rs 21,000 crore being working capital debt and the rest low-cost debt taken primarily to buy aircraft.

The airline has accumulated losses of over Rs 15,000 crore. The carrier lost Rs 2,226 crore in 2007-08, Rs 7,189 crore in 2008-09, and Rs 5,551 crore in 2009-10.

In the latest budget, the government has announced it would infuse Rs 1,200 crore in the next financial year. Till now, the government has injected Rs 1,200 crore and Rs 800 crore in two tranches in 2009-10, raising the national carrier's equity base to Rs 2,145 crore.