Moneycontrol
Sep 19, 2017 12:51 PM IST | Source: Moneycontrol.com

Bankers to meet govt officials on Wed to decide on further loans to Air India

Bankers will meet government officials including the Aviation Minister and the ministerial group on Wednesday to decide the fate of further loans to the financially-troubled national air carrier Air India.

ByBeena Parmar
Bankers to meet govt officials on Wed to decide on further loans to Air India

Beena Parmar

Moneycontrol News

Bankers will meet government officials including the Aviation Minister and the ministerial group on Wednesday to decide the fate of further loans to the financially-troubled national air carrier Air India.

According to banking sources who spoke with Moneycontrol, Air India has asked for some extra funding. "We will attend the meeting to find out the modalities of further capital requirement. We have to see if we can lend further because it is an NPA (non-performing asset) already. The government is also planning to sell its stake so we have to discuss, and then decide if we will be ready to provide more funding," add the above-mentioned sources.

Last week, a tender document (as per PTI reports) suggested that the government-owned airline is “looking for government guarantee-backed rupee (Indian rupee) short-term loans totaling up to Rs 3,250 crore in the first phase to meet its urgent working capital requirements by September 25, 2017”.

The tenure of the loan would be one year and the amount is proposed to be drawn in two or three tranches.

Banks were asked to submit their financial bids by September 19, indicating the amount of government-guaranteed short-term loans they are willing to offer.

At present, Air India has a total debt of over Rs 50,000 crore which comprises Rs 22,000 crore as aircraft loan and the rest as working capital loan and other liabilities. Most banks have declared it as an NPA.

Previously, Air India has made unsuccessful attempts in the past to clear its debt, including asking banks to convert a part of loans into equity share and asking Reserve Bank of India to provide concessions for debt restructuring.

According to bankers, given that it is an NPA, they have to look at what is on the table for them. Given that the government is looking at the disinvestment programme, there can be some benefits that can accrue from it to help banks.

The government has already decided to sell its stake in the airline as the Cabinet Committee on Economic Affairs (CCEA) gave its in-principle nod to the strategic disinvestment plan in June this year. Subsequently, an Air India-specific alternative mechanism was set up to guide the process.

After the government announced privatisation of Air India, InterGlobe Aviation was one of the firms which showed interest in acquiring Air India in June. The government wants the process to offload all or parts of the airline by early 2018.

On August 24, Rajiv Bansal was appointed as the interim Chairman and Managing Director of Air India.

A ministerial group is now looking into treatment of Air India’s unsustainable debt by considering hiving off of certain assets to a shell company, demerger and strategic disinvestment of three profit-making subsidiaries, among other things. Last month, the ministerial panel decided to appoint transaction advisors for Air India disinvestment.

The government is also looking to sell some of Air India’s real estate directly to expedite the state-owned carrier’s divestment. This follows the discovery that some of the assets are not owned by the carrier but on a 99-year lease from the government.

Separately, the government may also go for strategic disinvestment of Air India’s three profit-making subsidiaries: its MRO unit Air India Engineering Services, ground-handling arm Air India Transport Services and Air India Charters.

Its other subsidiaries include: Airline Allied Services, which operates Alliance Air and Hotel Corporation of India (which owns Centaur Hotels) along with a joint venture AISATS.
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