AIR INDIA IN FINAL MOVE TO CUT EXPENSIVE DEBT

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By TESTCustomwebLP TESTCustomwebLP April 11, 2011 19:41

AIR INDIA IN FINAL MOVE TO CUT EXPENSIVE DEBT

Air India creditors are discussing a proposal to convert 60% of its Rs 18,000-crore short-term debt into long-term debt with the rest converting into Compulsorily Convertible Preference Shares (CCPS). The move will reduce the airline’s annual debt repayment burden by around 42%.

The existing loans, which have a tenure of one year or less, will be increased to 10 years with a one-year moratorium on payment of the principal amount.

Out of the Rs 40,000-crore debt, the working capital debt is Rs 22,000 crore. The rest are long-term loans taken to fund aircraft acquisition. The working capital debt has a high cost, with an average interest rate of 12%.

Once the proposal is finalized both the Reserve Bank of India and the government will approve the deal. The national carrier has to submit a detailed proposal to the civil aviation ministry by April 15.

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By TESTCustomwebLP TESTCustomwebLP April 11, 2011 19:41
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