PSBs may convert their AI loans into equities

Air India, AIL Loans, PSBs, Loan Restructuring
A consortium of 19 public sector banks is considering the possibility of converting its loans worth Rs 10,000 crore to Air India into equity. If the plan materializes, as much of 40 percent of Air India’s equity will be held by the consortium.
The proposal, which is said to be in its initial stages, needs to be approved by the boards of each of the banks and the Cabinet before it is finally put into action, a process that may take up to six months. The move will help de-stress banks’ loans and is being looked at as a win-win situation for both Air India and the banks. It will not only help the state-owned airline to rework its outstanding funds with the banks but also help the banks as stakeholders who can participate at the Board level in Air India’s decision making.
Air India is also in talks with the Life Insurance Corporation of India to provide a loan of up to Rs. 10,000 crore to help finance its proposed acquisition of six Boeing 787 and three 777 aircraft. The nine aircraft, which are to be delivered in 2016-17 and 2017-18, are a part of the 68-Boeing aircraft order that the airline had placed in 2005.
The proposal is said to have been discussed in a meeting that Ashwani Lohani had with the LIC Chairman recently.
Air India will now have to approach the Union Cabinet to gets its approval to go in for the outright purchase of these nine aircraft instead of going in for a sale and leaseback (SLB) arrangement as it had done when it signed the agreement for the purchase of 68 Boeing aircraft in 2005.

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