Cash-strapped Air India (AI) is likely to reduce its annual interest burden on working capital and long-term loans by as much as Rs 1,200 crore as part of a restructuring plan, part of which would be implemented by as early as next week.
AI has taken Rs 22,165 crore in working capital from banks on which it pays Rs 2,400 crore as interest annually. The state-owned airline has taken Rs 22,000 crore of long-term loans from various financial institutions for financing aircraft acquisition with an annual interest liability of Rs 1,000 crore.
AI is expected to refinance its aircraft loans by next week.The plan, prepared by top AI officials led by finance chief S Venkat, would result in a saving of Rs 200 crore annually.
Out of the Rs 22,000 crore, around Rs 16,000 crore is foreign currency loans for which the interest is very low. "The remaining is the IDBI consortium loan for which we are paying an interest of around 12-13%. This would refinanced through an ICICI bond issue of 15 to 20 years carrying a much lower interest rate of 9-10%," said an AI official, who did not wish to be named.
The working capital loan of Rs 22,165 crore would be restructured into Rs 11,000 crore of term loans of 15 years with an interest rate of 10%, down from the 13-14% that AI pays at present. Rs 7,000 crore would be converted into cumulative preference shares capital with a dividend rate of 8.5% and the remaining amount will be cash credit.
AI is already in talks with the RBI for a special waiver of its provisioning norms as reported by the HT in July. Once cleared by RBI, this would result in a saving of Rs 1,000 crore.
AI under CMD Rohit Nandan has been devising ways to reduce losses and expenses. The airline's accumulated losses are estimated to be around Rs 20,000 crore.
The airline had recently defaulted on payment of statutory dues which includes service tax and interest on working capital. Its loans were in danger of becoming Non-Performing Asset.