Moody's Warns of Air India Default Impacting Lender Ratings

Air India's financial woes have triggered a warning from Moody's Investor Services, indicating that a default by the flag carrier could have significant implications for its lenders, including State Bank of India, Punjab National Bank, and Bank of Baroda, which collectively account for 70% of Air India's borrowings. The rating agency expressed concerns over the government's support, stating that it has been delayed and inadequate. If Air India defaults, it could impact the profitability of its lenders, compromising their core tier-1 capital. The carrier's accumulated losses stand at around Rs13,000 crore, with a debt pile of Rs46,000 crore as of March 2010.

Key Takeaways:

• Moody's has warned of potential default by Air India, which could impact the ratings of its lenders, including State Bank of India, Punjab National Bank, and Bank of Baroda, accounting for 70% of Air India's borrowings.
• The government's support to Air India has been described as delayed and inadequate by Moody's, raising concerns over its willingness to provide timely support to sovereign-owned PSU enterprises.
• Air India's accumulated losses total around Rs13,000 crore as of March 2010, and the debt pile has grown to Rs46,000 crore.
• A default by Air India could significantly impact the profitability of its lenders, compromising their core tier-1 capital, which includes equity and reserves levels.
• The State Bank of India, Punjab National Bank, Bank of Baroda, Bank of India, IDBI Bank, Central Bank of India, and Oriental Bank of India are among the lenders that could be impacted by an Air India default.
• Air India received an equity infusion of Rs1,200 crore this month, but the government has only provided a temporary solution to the airline's financial troubles.
• A Group of Ministers (GoM) is scheduled to meet on August 17 to discuss Air India's turnaround plan, which could help the carrier overcome its financial crisis.

Statistics:

• 70% of Air India's borrowings are accounted for by State Bank of India, Punjab National Bank, Bank of Baroda, Bank of India, IDBI Bank, Central Bank of India, and Oriental Bank of India.
• Rs13,000 crore: Air India's accumulated losses as of March 2010.
• Rs46,000 crore: The total debt pile of Air India as of March 2010.
• 15%: The proportion of core tier-1 capital of rated banks that has been lent to Air India.
• Rs1,200 crore: The amount of equity infusion provided to Air India this month.

Sources:

• Moody's Investor Services (Statement on Monday)
• Domain-b.com (Copyright 2010, distributed by Contify.com)