Air India seeks ministry nod to issue Rs.5,500 crore bonds

"We have sent a proposal to the ministry a week back to seek their approval on the issue," a senior Air India official, who did not want to be named, told IANS.

According to the official, the proposal seeks to raise about Rs.5,500 crore through the 15-year bonds which would be issued to the consortium of banks.

"This Rs.5,500 crore will help us in many ways. First, it will ease our working capital requirement, and most importantly help us in restructuring our long-term debts, thereby increasing our savings."

The move, which is a component of the company's turnaround plan, envisages to save Rs.180 crore in interest payments it makes on a part of Rs.40,000 crore loans it took for aircraft acquisition and working capital requirement.

Air India's cumulative interest per annum accounts of Rs.3,200 crore, including Rs.1,800 crore for the 111 aircraft which it ordered since 2006.

Earlier, Air India chairman and managing director Arvind Jadhav said the revival plan will focus on equity infusion, shift to long-term loans, interest cuts, making repair and ground-handling operations into separate entities, and resolving integration issues.

Under the plan prepared by global consultancy firm Deloitte and SBI Caps, the flag carrier intends to save around Rs.900 crore on interest payment by converting 60 percent of its short-term loans on which it pays anywhere around 10 percent to 12 percent interest to long-term loans, which have slightly lower interest rates.

"Looking at Air India's current situation and its declining revenues and market share, there would be many questions and concerns that would be raised by the banking fraternity on this proposal," a senior analyst told IANS.

The government had already invested Rs.2,000 crore (around $450 million) into the carrier last year and it will receive another Rs.1,200 crore ($250 million) this year.