The Indian government yesterday cleared the financial bailout package for Air India (AI), which paves the way for a transfusion of additional equity into the airline and restructuring of its huge debt burden into soft loans and bonds. The turnaround plan for AI has been approved, civil aviation minister Ajit Singh told journalists after a meeting of the Cabinet Committee on Economic Affairs.
As part of the state-run carrier's restructuring plans, the government had announced infusion of Rs.4, 000 crore during the current fiscal in the Budget. This will raise the airline's equity base to Rs.7, 345 crore. The SBI-led consortium of 19 banks had last month approved the financial restructuring plan, which includes debt revamping of Rs.18, 000 crore by the banks and a committed equity infusion by the government.
AI had signed four agreements with the consortium on March 31 which include conversion of about Rs.10, 500 crore of the airline's working capital into long-term loan carrying an annual interest of 11%. This is expected to lead to savings to the airline of about Rs.1, 000 crore in 2012-13. In addition, non-convertible debentures (NCDs) guaranteed by the government worth Rs.7, 400 crore would be issued and subscribed by investors.
Proceeds from NCDs would be used to repay the lenders. Apart from this, part of the working capital of about Rs.3, 500 crore would be restructured as cash credit arrangement.
The Boeing 787 purchase was also given the green light so deliveries can start next month.