Despite huge efforts being made to save India's
loss-making flagship carrier Air India (AI) from divestment, lenders and other stakeholders unsatisfied over its
restructuring-turnaround plan for 2010-14 that envisages revenue enhancement and
expenditure reduction in phases, will meet top government officials early in June to press for the airline's partial divestment.
Industry sources said the airline's promoters are also looking for a strategic investor, possibly an Indian entity for buying stakes in the carrier as foreign direct investment (FDI) rules do not allow foreign airlines to pick up stakes in Indian carriers.
The investors, who will be meeting civil aviation ministry authorities early this month, will negotiate regarding the airline's divestment as its total
debt stands at over Rs 40,000 crore of which around Rs 20,000 crore is for working capital and the rest for aircraft purchases.
The working capital loan was raised from a consortium of 22 banks, with which the ailing carrier has been negotiating to restructure the loan. With the government reluctant to infuse more equity into the airline, the AI management has been persuading banks to convert a portion of its debt into equity and the remaining into long-term debt to help reduce its interest burden.
FACE-SAVING ACT
Despite efforts to save Air India (AI) from divestment, lenders & stakeholders are unsatisfied over its restructuring plan
AI's promoters are looking for a strategic investor for buying stakes in the carrier as FDI rules do not allow foreign airlines to pick up stakes in Indian carriers
Investors will negotiate regarding the airline's divestment as its total debt stands at over Rs 40K cr of which Rs 20,000 cr is for working capital & rest for aircraft purchases
The working capital loan was raised from a consortium of 22 banks, with which AI has been negotiating to restructure the loan
Ministry official confirmed that investors have requested for a meeting
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The government too, is unhappy over AI's restructuring plan and is reluctant to infuse more equity in the airline.
The further equity infusion of Rs 1,200 crore, which finance minister Pranab Mukherjee announced in the Union budget this year, is also in question if top officials in the aviation ministry are to be believed.
The airline has already been given Rs 2,000 crore in tranches, but the airline has demanded Rs 10,000 crore more equity for an effective turnaround.
Top civil aviation ministry official confirmed that the investors have requested for a meeting. "We are meeting shortly. What we have been communicated is that they would discuss the restructuring issue of Air India and the possible divestment of the carrier," the official said. Industry officials also said that the bankers and other lenders of AI are eyeing the airline's huge real estate assets spread across the country.
"It is unfortunate that the airline is left to die a natural death. As we understand, the government too may be willing to divest a partial stake in the carrier to a strategic investor. It looks to be a planned strategy both from the government and the bankers, mostly PSUs who have lent funds to the carrier. It may be a given to a highest bidder. It may form a consortium," said an industry expert.
The management wants the lenders to convert 40 per cent of the total working capital debt in to cumulative redeemable preference shares. It wants the lenders to convert the remaining to long-term debt and bring down the average interest rate to 11-11.5 per cent.
Courtesy: Mail Today 
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