Beleaguered Kingfisher Airlines staring at demise.
Bureau Report
BANGALORE: The financial turmoil for the Rs. 7,000 crore ($1.3 billion)-in-debt Kingfisher Airlines is taking an ugly turn with lenders running out of their patience with the non-functioning of the Vijay Mallya-run enterprise, and decided to recall their capital.
Bankers’ representatives said after a meeting with Kingfisher executives in Mumbai today that they had given the promoters sufficient time to pump much-needed capital into the airline, reported LiveMint.
“We have reached a dead end. Now we will seek legal advice for recovering the debt,” said a senior banker, requesting anonymity.
Airline officials, however, put a positive spin on events. Sanjay Aggarwal, chief executive officer (CEO), said the grounded airline was preparing for a restart by summer and that salary dues of employees will be paid shortly.
Kingfisher Airlines has been grounded since the beginning of October, first because of staff protests against unpaid salaries and thereafter because of regulatory issues. Its flying license expired on December 31st, although that can be revived through a re-application.
Shyamal Acharya, deputy managing director (corporate) at State Bank of India (SBI), said the process of recalling the loans will take 7-10 days to get under way, said LiveMint.
“They were given a chance; they were required to say what’s their plan,” Acharya said. “The consortium (of lenders) didn’t find anything new or concrete… A small group of lenders will be constituted to take legal advice.”
Last month, a core group of lenders had asked grounded Kingfisher to infuse at least Rs.800 crore ($150 million) into the airline before the banks considered any further loan recast and the extension of a no-objection certificate that would enable the airline to resume flights.
Bankers have taken over two properties of airline chairman Mallya as collateral in Mumbai and Goa worth Rs.70 crore ($17 million), two helicopters worth Rs. 84 crore ($15.6 million), and shares of United Spirits Ltd (USL) and Mangalore Chemicals and Fertilizers Ltd worth Rs.450 crore ($83.7 million) at current market prices.
Lenders also have first charge on the airline’s fixed assets such as coaches that ferry passengers and tractors worth Rs.150 crore ($27.9 million), said the report. Besides, the banks also received a corporate guarantee from United Breweries Holdings Ltd, the holding company of parent UB Group, and a personal guarantee from Mallya. In addition, lenders have the Kingfisher brand, valued at Rs.3,000 crore ($557 million) by audit firm Grant Thornton India, as collateral.
“We don’t have an exact number, but including the personal guarantee and the company’s brand value, the amount will be more than what the banks have given in loans. We will consider everything,” Acharya said, adding that individual banks will have to take a decision at the board level, said the LiveMint report.
A senior official at state-owned Bank of India (BoI) said the bank’s exposure to Kingfisher was fully protected by corporate guarantees provided by Mallya’s other companies.
“It is binding on the company, and they will have to pay us back as those companies are not distressed,” said the official, confirming that the banks have decided to recall loans to the airline, although he too said there may be a haircut involved.
He also said the money through the Diageo Plc deal will eventually come to banks as part of recovery proceedings.
Diageo, the world’s largest liquor company, is acquiring 53.4% of USL. It will buy a 27.4% stake, including 19.3% from Mallya, for £660 million (around Rs.5,580 crore), and fresh equity from the firm. The remaining 26% is to be bought from the public.
SBI, the leader of the lenders’ consortium, has the maximum exposure to Kingfisher at Rs.1,600 crore, followed by Punjab National Bank (Rs.800 crore), IDBI Bank Ltd (Rs.800 crore), BoI (Rs.650 crore), Bank of Baroda (Rs.550 crore), United Bank of India (Rs.430 crore), Central Bank of India (Rs.410 crore), UCO Bank (Rs.320 crore), Corporation Bank (Rs.310 crore), State Bank of Mysore, an SBI associate bank (Rs.150 crore), Indian Overseas Bank (Rs.140 crore), Federal Bank Ltd (Rs.90 crore), Punjab and Sind Bank (Rs.60 crore) and Axis Bank Ltd (Rs.50 crore). Overall, their exposure is Rs.6,360 crore, and once the unapplied interest is added, it becomes Rs.7,000 crore, said LiveMint.
Even as the financial crisis has worsened for the beleaguered airlines, the Kingfisher website, decorated with images of lithe flight attendants and the carrier’s goateed owner Mallya, still touts “the Kingfisher experience” and “special low fares.” Only a small entry across the top reveals, “we have suspended all future bookings till further notice,” referring inquiries to its call center, reported the Financial Times.