In a big boost to its precarious financial position, Air India's (AI) financial restructuring plan (FRP) has been approved by a consortium of banks, which might enable the ailing carrier save several hundred crores in the first year itself.
As part of the FRP, Air India signed four agreements with the SBI-led consortium late on Friday evening. These were Master Restructuring Agreement, Working Capital Facility Agreement, Appointment of Facility Agent Agreement and Appointment of Trustee Agreement, airline officials said today. "The Cabinet approval for infusion of funds is still awaited and is expected to be received some time next week," the officials said.
Implementation of the FRP would begin after the Union Cabinet approves additional equity infusion into the airline, they said. Officials of at least 19 banks were present at the signing ceremony here.
One of the major highlights of the agreements include conversion of about R10,500 crore of the airline's working capital into long-term loan, carrying an annual interest of 11%. "The first year interest would accumulate in a funded interest term plan," they said, adding these would lead to substantial savings of about R1,000 crore in 2012-13 itself. Non-convertible debentures, guaranteed by the government, worth R7,400 crore would be issued and subscribed by the investors, the officials said, adding proceeds from the NCDs would be used to repay the lenders. Apart from this, part of the working capital of about R3,500 crore would be restructured as cash credit arrangement. Under the FRP, AI has proposed the government should infuse equity of about R30,231 crore in the 2012-21 financial period. It also includes conversion of short-term working capital loan of R7,000 crore into cumulative preferential shares and more time to repay a debt amount of approximately R14,000 crore.