SBI Caps to conclude AI debt recast by Feb

SBI Caps expects to finalise a plan for restructuring the debt of loss-ridden national air carrier Air India later this month, or in early February.

"We are hopeful of closing this exercise by the end of January, or early next month. We hope Deloitte will submit its report soon so that we can meet this deadline. We expect the Deloitte report shortly," SBI Capital Markets Managing Director and Chief Executive S Vishvanathan told PTI.

In early December, Air India had appointed global consultancy firm Deloitte to ratify a prospective financial restructuring plan for the company, which was prepared by SBI Caps -- the capital markets arm of the State Bank Group -- for an estimated fee of Rs 25 lakh.

Though the foreign consultant was given one week to 10 days' time to complete the exercise, Air India is yet to get the vetted report, according to a top company official.

"We are yet to get the report from Deloitte," a senior official of the carrier told PTI, seeking anonymity. But he quickly added, "The consultant made some presentations to us along with a preliminary report and we are analysing it."

While asking Deloitte to vet the SBI Caps report, Air India claimed the foreign agency was appointed mainly to vet the business plan as an independent aviation consultant before the restructuring plan was submitted to the Reserve Bank.

The national carrier is saddled with debt of about Rs 40,000 crore. Of this, as much as Rs 18,000 crore is working capital loans taken from a consortium of banks.

The remaining Rs 22,000 crore worth of loans is intended for payment of orders for aircraft from Boeing and Airbus. It has already raised around loans worth Rs 14,000 crore to fund the purchases and is currently in the process of raising more money.

This working capital loan was mostly extended by state-run banks like SBI, PNB, IDBI Bank and Syndicate Bank.

Over the past four fiscals, Air India's losses have aggregated to Rs 14,000 crore. 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 per cent from 12 per cent at present, considerably reducing its debt servicing burden.

When the going was good prior to the global financial crisis, the airline had placed a massive orders for new aircraft worth Rs 44,000 crore in 2007.

It had ordered 68 planes from American company Boeing and 43 from European aircraft company Airbus. The Boeing order was guaranteed under the Indian government's sovereign guarantee as well as the US Exim Bank.

However, following the domino effect of the global financial crisis, the entire global airline industry suddenly found the going tough.