Kingfisher wants banks to give it another week

Tags: Companies
A week after the UB-Diageo deal was announced, ailing Kingfisher Airlines has reached out to its lenders with a request for some more time to finalise a revival pl­an. In a meeting with the consortium of bankers on Friday, Vijay Mallya-owned King­fisher Airlines’ senior management sought a week’s time to submit a turnaround plan. Kingfisher was represented by chief executive Sanjay Aggarwal and chief financial officer AK Ravi Nedungadi.

The bankers and the senior management are expected to convene a second meeting soon when promoter Vijay Mallya will participate to submit a revival plan. Bankers who attended the meeting say that they would like to give a final hearing to Vijay Mallya to see if there could actually be a viable revival package for the airline.

As the meeting came immediately after the Vijay Mallya-owned United Breweries had signed a $2 billion deal with Diageo group and sold controlling stake of 53.4 per cent in United Spirits (USL) on November 9, the bankers expected some promise of an equity infusion.

But the UB management told the bankers that they have borrowed funds, which they need to pay off, and the money from the stake sale cannot flow into the airline.

Another senior banker who attended the meeting said, “We would like to see the company revive so that our loans are safe. So giving them 10 days is not a big deal. We will see what the company has to offer before we initiate some action for recovery or legally." In an October 19 report, DSP Merrill Lynch said, “Kingfisher with a 3 per cent market share has temporarily shut down its operation to negotiate with the workers. This is another marginal positive for the remaining carriers as this further consolidates the industry and eases supply prior to the busy season. Additionally, the show-cause notice by the regulator further puts a question mark on Kingfisher’s return. We do not expect Kingfisher to normalise its operations in the near term.”

Among lenders, SBI has an exposure of around Rs 1,200 crore to Kingfisher Airlines and IDBI Bank Rs 727 crore. Bank of India has extended a loan of Rs 575 crore, while Bank of Baroda has an exposure of Rs 537 crore. The lenders consortium has 17 banks with a total exposure of Rs 7,700 crore in loans, the debt that the company has failed to service from last year forcing banks to classify it as a non-performing asset. Private sector lender ICICI Bank sold off its Rs 450 crore debt to the airline to Srei Infrastructure Finance in July earlier this year.

According to its 2011-12 annual report, Kingfisher Airlines’ net loss more than doubled to Rs 2,328 crore in 2011-12 from Rs 1,027 crore in the previous year. Its total long-term borrowing stood at Rs 5,695 crore as on March 31, while its short-term borrowings rose to Rs 2,335 crore at the end of 2011-12.

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