AI debt restructuring to put Rs2,000 crore burden on 14 lenders

Official figures show the debt-ridden carrier has outstanding loans and dues worth Rs67,520 crore, of which Rs21,200 crore is working capital loan, Rs22,000 crore is long-term loan on fleet acquisition, Rs4,600 crore is vendor dues besides an accumulated loss of Rs20,320 crore

New Delhi: Air India’s (AI) debt restructuring will impose a burden of Rs2,000 crore on the consortium of 14 lenders, reports PTI quoting a senior finance ministry official.

“There will be a hit of Rs2,000 crore on the bottomlines of 14 banks due to lower returns and higher provisioning requirements,” the official said.

A Group of Ministers (GoM) led by finance minister Pranab Mukherjee had on Tuesday allowed Air India to raise Rs7,400 crore by issuing government-guaranteed bonds or by other means. The approval is subject to Cabinet clearance.

The official, however, said that the banks will not have to write down loans extended to the cash-strapped carrier.

The bond is likely to carry a coupon rate of 8.5%-9% and financial institutions may subscribe to these bonds, official sources said, adding this would be part of the national carrier’s financial restructuring plan.

Official figures show the debt-ridden carrier has outstanding loans and dues worth Rs67,520 crore, of which Rs21,200 crore is working capital loan, Rs22,000 crore is long-term loan on fleet acquisition, Rs4,600 crore is vendor dues besides an accumulated loss of Rs20,320 crore.

Banks and financial institutions had proposed several measures to beef up AI’s networth and these were among the measures approved by the GoM, the sources said.

Air India’s debt restructuring plan had hit a hurdle after the banks had refused to convert a part of the short-term debt into equity.

As per the earlier plan, the banks were to restructure a debt of Rs18,000 crore, of which around Rs10,500 crore would have had to be converted into long-term with a repayment period of 10-15 years and the rest was to be converted into equity by banks. The banks had raised objections to this.

This situation had prompted the GoM to permit Air India to raise resources through bonds or non-convertible debentures, the sources said.

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Share prices highly overbought: Wednesday closing report

The market must shed some weight to climb higher

All the Asian indices opened fairly in the positive and also all ended in the green, following a rally in the US markets yesterday. This is on the back of Greece's government edging closer to securing a bailout package. The US also closed in the green yesterday. On the domestic front, the indices opened slightly above yesterday’s close. However, for most of the trading session it managed to keep itself in the green and tried to edge higher after each dip. As we mentioned yesterday that the Nifty should be able to avoid going below the previous day’s low to stop the downward trend. The index made a higher low today at 5,325. From here we may see the Nifty reaching the level of 5,465 if it manages to make a higher low each day. A close below today’s low will see a small dip. The National Stock Exchange saw a volume of 92.93 crore shares

A Greek official said yesterday the government and international creditors were close to a final draft of an agreement on budget and structural measures needed to extend the financial lifeline. Another official said earlier yesterday talks were focused on how to make up for a 550 million-euro shortfall in new austerity measures for this year. At stake is whether Greece wins the bailout, secures a debt write-off with private creditors and remains in the euro region.

The Sensex and the Nifty opened at 17,632 and 5,344 respectively. After the opening of the European market the indices hit their intra-day highs at 17,809 and 5,397, however it was a lower intra day high from yesterday. The indices hit their intra-day low at 17,580 and 5,325. The Sensex closed at 17,707, 85 points up (0.48%) while Nifty closed at 5,368, 33 points up (0.62%). Yesterday’s loss has been completely wiped off in today’s upmove

Also in the positive news was the number of US job openings jumping 8.3% in December, to 3.4 million, the number being just short of September’s reading, which was the highest since August 2008. The European indices were trading in green and so were the US index futures.

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Plan panel flays current gas pricing methodology

“On the one hand, we (advocate) freedom to price gas on an arm’s length basis. But on the other hand we also say that (companies) must allocate gas according to the government’s priorities,” Planning Commission deputy chairman Montek Singh Ahluwalia said

New Delhi: Planning Commission deputy chairman Montek Singh Ahluwalia has criticised the current gas pricing methodology where producers are asked to ‘discover’ market price of the fuel by calling bids from consumers identified by the government, reports PTI.

“We should decide now ab intio what should be the price of natural gas. What should be the principles, which should be applied,” he said at the launch of the book, ‘Natural Gas in India: Liberalisation and Policy,’ written by Anil K Jain, a senior bureaucrat and former joint secretary-exploration in the oil ministry.

“On the one hand, we (advocate) freedom to price gas on an arm’s length basis. But on the other hand we also say that (companies) must allocate gas according to the government’s priorities,” he said citing example of fertilizer sector which can “bid for whatever price” because their input cost is pass through.

Urea-making fertiliser plants have been accorded top priority in allocating domestic natural gas by the government.

The country, he said, “must internalise real cost of energy” while subsidy should be determined separately.

“I am not aware that any of the existing model (for pricing of gas) meet the test of economic rationality,” he said.

Speaking of the formula which formed the basis for fixing the price of $4.2 per million British thermal unit for the gas produced by Reliance Industries (RIL) from KG-D6 block, Mr Ahluwalia said: “Under which circumstances that formula should be determine the price of gas.”

“These are very big decisions and the government has to take informed view on that. It is very easy to say that particular formula does not have much rationality, but then it is quite difficult to propose what the formula should be in future. The whole issue of energy is quite crucial,” he said.

Mr Ahluwalia advocated freeing of natural gas pricing. The Planning Commission has also advocated the market determined energy price in its Integrated Energy Policy which was approved by the Union Cabinet.

Speaking on the occasion, Cairn India CEO Rahul Dhir said taxation system in the country was discriminatory as crude oil producers enjoyed a seven-year holiday from payment of income tax while the same was not available for natural gas producers.

He said energy explorers had no control over what is discovered when a well is drilled and it may turn out that a well may contain both oil and gas and therefore there was an urgent need to end the discrimination between crude oil and gas for tax purposes.

Mr Jain’s book contains comprehensive discussion of the current status of India’s gas sector, including medium to long term outlook for demand and supply.

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