Air India to issue Rs7,500-crore preference shares to lenders
29 Dec 2011
Air India will issue preference shares worth Rs7,500 crore ($1.4 billion) to its lenders as part of a financial restructuring plan. The board of the ailing state carrier approved the preferential issue at its meeting today.
The board, at its meeting, "approved the rearrangement of authorised share capital by issue of preference shares worth Rs7,500 crore, which are proposed to be allotted to the lenders of the working capital as part of the financial restructuring plan," an Air India spokesperson said.
Air India, which has accumulated losses of over Rs18,000 crore over the years, is working out a bailout plan with the government and its lenders.
The move follows a significant increase in Air India's revenue earnings and passenger traffic.
Air India reported a 10 per cent increase in profitability rate in November while its passenger revenue rose 12.3 per cent during the month.
Meanwhile, the civil aviation ministry has moved a cabinet note seeking equity infusion in the national flag carrier and for approving the restructuring plan.
The lead lender to Air India, State Bank of India, is also reported to have moved the Reserve Bank of India for relaxations in the provisioning norms.
The bankers have sought an extension of provisioning norms so that the provision could be spread over five financial years.
The debt recast plan involves conversion of short-term working capital loan of Rs7,000 crore into cumulative preferential shares and more time to repay the remaining debt amount of approximately Rs14,000 crore.
Air India has total outstanding short-term loans of Rs21,511 crore on which it pays interest of over Rs2,600 crore annually.