The Reserve Bank of India (RBI) has approved the loan restructuring plan for debt-ridden national carrier Air India.
The central bank has also said the government has to infuse R6,500 crore of equity into the airline, as requested by the national carrier.
Moreover, around R7,000 crore worth of loans are to be converted into into cumulative redeemable preferential shares, an Air India official said. The loan repayment obligation has been set at 10 years for the conversion of working capital loans to long term loans. Air India is expected to get a benefit of a 2% lower interest rate.
?Now that the RBI approval has come we will go to the individual banks for restructuring the loans,? an Air India board member told The Finanacial Express. ?As regards to the 787 Dreamliner purchase, the cabinet will now have to take a call.?
The loan restructuring process will take 120 days to complete. Close to 28 banks with exposure to Air India are yet to formally sanction the restructuring.
?We had asked for conversion of 60% of our working capital loans, which were in excess of R13,000 crore, to be converted to long term loans but RBI has approved conversion of only R3,500 crore,? the Air India official said.
He added, that if the government agrees to the equity infusion of R6,500 crore, the money will be used to repay some more of the working capital loans to reduce the company?s interest cost as well used for the current working capital requirements of the company.
Air India?s debt comprises close to R20,000 crore of working capital and R22,000 crore for aircraft acquisitions. Working capital has been mostly extended by government-run banks such as State Bank of India, Punjab National Bank, IDBI Bank and Syndicate Bank amongst others.
The group of ministers, which met in October to decide on equity infusion and acquisitions of 27 Boeing 787 Dreamliner aircraft had asked the RBI to vet the debt restructuring plan before sending the proposals to the Cabinet.
In September, Air India has also got guarantees for up to $1.3 billion from the US Ex-Im Bank to go ahead with the Dreamliner purchase.
