Major jolt to Air India as lenders reject debt restructuring
A consortium of banks with exposure to state-owned Air India, rejected a proposal to convert 60 percent of the carrier's USD 4 billion debt into long-term loans and accept the balance in equity, the report said citing unnamed sources.
"We are not in a position to take any haircut," the unnamed chairman and managing director of a public sector bank involved in the discussions was quoted as saying by the newspaper.
Banks are reluctant to accept dividend-paying equity in the airline given its unprofitability, the report said.
The 26-member consortium, led by State Bank of India and including IDBI and Bank of Baroda, in November gave broad approval to its financial restructuring, a source told Reuters.
Rising oil prices, high taxes of jet fuel and a fierce price war driven by high competition has hurt profitability of Indian airlines, with private carrier Kingfisher Airlines also struggling to repay creditors.
The aviation ministry proposes to provide Rs 330 billion to Air India by 2017 as part of the government's 12th Five-Year Plan, according to a working group report seen by Reuters last month.
A government report in December said the total debt of India's airlines is expected to hit USD 20 billion in the year ending March. Air India is seen contributing more than half of the projected total losses of USD 3 billion for the industry in 2011/12, the Centre for Asia Pacific Aviation has said.