Friday 28 September 2012

Vijay Mallya in talks to recapitalise Kingfisher Airlines, relies on government's FDI policy


Liquor-turned-Airlines tycoon Dr Vijay Mallya said the promoters of Kingfisher Airlines Ltd had pumped Rs 1,150 crore into the debt-laden airline since April, and were making all efforts to further recapitalise the company.

Kingfisher officials are expected to have a meeting with its major lenders - led by the State Bank of India and Bank of Baroda - on Thursday. The meeting will be the first such held between the parties, since the UPA government's decision to allow 49% foreign direct investment in the Indian aviation sector earlier in the month.

The airline, which is yet to report a profitable quarter since its inception in May 2005, has been reeling under a massive debt load and accumulated losses of about Rs 15,000 crore.

It has been the biggest casualty in the turbulence affecting the Indian aviation industry, which has been hit hard by a combination of high fuel taxes, airport charges and low fares. At one point the second-largest carrier in the country, Kingfisher is now the smallest operator in terms of market share.

For the quarter ended June 30, the airline's loss widened to Rs 651 crore from Rs 264 crore a year ago, prompting widespread fears about its ability to continue as a going concern.

"It is wrong to say domestic airlines in India are profitable. None are making profits," Mallya said in Bangalore on Wednesday.

His statement comes barely a month after bigger rival Jet Airways announced a surprise profit for the same quarter, earning Rs 24.7 core, compared with a loss of Rs 123 crore for the year-ago period, driven largely by the performance of its low-cost arm Jetlite.

However, Mallya has consistently denied that Kingfisher was on the verge of closure, or for sale, maintaining that a number of foreign investors have professed an interest in picking up equity in the airline.

"Every airline is struggling, therefore it is prudent to to cut back on capacity to reduce losses," the chairman told shareholders at the company's 17th annual general meeting.

According to a report by Kingfisher's auditors released prior to the government's decision to allow FDI in aviation, the airline has been struggling to make payments to its employees, whose number has gone down by 1,651 people to 5,696 employees as the airline is in a 'holding pattern', awaiting policy changes.

"Due to the current situation, your company is operating as a 'holding pattern' with limited operation, pending policy changes which are in the offing," the director's report said.

However, Mallya also debunked media reports that the airline is operating a fleet of less than 10 aircraft.

"It is untrue that we are flying only seven aircraft. We have 40 aircraft that appear on our operator permits, and are flying 15 of them on over 80 routes," he said.

Mallya, however, admitted that the company was looking for fresh funds to put its remaining 25 aircrafts back up in the air. Kingfisher is currently in talks with foreign carriers to sell a portion of its stake, according to him.

However, Mallya did not disclose the name of the foreign carriers or the exact stake the ailing airline plans to offload to reduce its debt burden.

"It has been only 10 days since the government announced the entry of foreign direct investment in the Indian aviation sector. Therefore, you can only surmise the level of talks we have held so far," he told reporters.

The Kingfisher Airlines chairman had given guarantees worth Rs 5,904 crore for the carrier's loans and other liabilities in 2011-12, but did not get any commission for the same because of lenders' opposition. While guarantees given by Mallya fell from Rs 6,156 crore in the previous year 2010-11, the guarantees provided by Kingfisher's holding and associate companies rose from Rs 8,863 crore to Rs 8,926 crore in this period.

Mallya had got a commission of Rs 51 crore for these guarantees in 2010-11, but the airline has said payment of such commissions has been withdrawn after directions from the consortium of its lenders.

Shares of Kingfisher Airlines were up almost 9% at Rs 15.70 at the close of trade on Wednesday, on the Bombay Stock Exchange.





Shekhar Gupta
CEO
Capt. Shekhar Gupta [ Pilot, DIAM, M.Ae.S.I., MAOPA [USA] ]
shekhar@aerosoft.in 
Blog : http://shekharaerosoft.blogspot.in/ 


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Bankers likely to adopt more aggressive stance towards Kingfisher Airlines



 Lenders to debt-laden Kingfisher AirlinesBSE -4.95 % are expected to adopt a more hardened stance during their meeting with Chairman Vijay Mallya on Thursday, as they up their ante to recover about Rs 7,500 crore loaned to the airline.

"The Kingfisher loan has become a non-performing asset for most banks. During our last meeting, we had categorically asked for a concrete plan relating to debt recovery from the Kingfisher management, including Mallya, before September 30," a banker with one of the leading lenders said on the condition of anonymity.

On Wednesday, Mallya, who also heads Bangalore-based UB Group, confirmed that a meeting had been scheduled with the lenders consortium, but insisted that it was to discuss 'routine matters.'

Shares of the company were up more than 7 per cent at Rs 16.85 in afternoon trade Thursday on the Bombay Stock Exchange.

Senior Kingfisher Airline officials, including, CEO Sanjay Aggarwal and United Breweries Chief Financial Officer AK Ravi Nedungadi, are expected to attend the meeting, in a bid to assay lenders' doubts.

"Mallya is talking about getting foreign direct investment in Kingfisher but we want to know how the company plans on offloading equity," the source said.

The meeting will be the first such held between the parties since the UPA government's decision to allow 49 per cent foreign direct investment in the Indian aviation sector earlier in the month.

Around 17 banks, led by the State Bank of IndiaBSE 0.30 %, have lent around $1.4 billion (about Rs 7,500 crore) to the airline, which has failed to service its debt since early 2012.

While SBI has lent Rs 1,400 crore to keep the airline afloat, Punjab National BankBSE 1.48 % and Bank of Baroda have lent Rs 700 crore and 500 crore, respectively. Another lender, ICICI BankBSE 1.21 %, offloaded its entire exposure of Rs 450 crore to Kolkata-based Srei Infrastructure Finance.

Formerly India's second-largest carrier, Kingfisher is reportedly in talks with foreign carriers to sell a portion of its stake, according to its chairman.

However, Mallya did not disclose the name of the foreign carriers or the exact stake the ailing airline plans to offload, as it looks to lower its crushing debt burden, while continuing to operate as a going concern.

Kingfisher has been the biggest casualty in the turbulence affecting the Indian aviation industry, which has been hit hard by a combination of high fuel taxes, airport charges and low fares.




Shekhar Gupta
CEO
Capt. Shekhar Gupta [ Pilot, DIAM, M.Ae.S.I., MAOPA [USA] ]
shekhar@aerosoft.in 
Blog : http://shekharaerosoft.blogspot.in/ 


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Banks reject Kingfisher Airline's loan demand; SBI Capitals to make revival plan


MUMBAI: Turning down a request for Rs 200 crore working loan by Kingfisher, the SBI-led lenders consortium on Thursday asked SBI Capitals to chalk out a fresh revival plan for the cash-strapped airline in the next 2-3 weeks.

Kingfisher Chairman Vijay Mallya made a presentation in a meeting with lenders at Bangalore headquarters this afternoon, the first such meeting after the government's policy decision allowing foreign airlines to invest in domestic carriers.

According to lenders, Mallya did not offer any concrete revival plan as he could not commit on equity infusion by promoters. An official from a public sector bank said the lenders turned down a request from Mallya for an immediate working capital loan of Rs 200 crore. Since this January, the airline has not been servicing its Rs 7,000 crore bank debt.

The official said that the lenders have asked SBI Capitals to make a new revival plan, the third one, for the airline in the next two-three weeks.

Though the company suggested a second debt restructuring, nothing was finalised, a source said.

When asked whether banks are open to a second CDR in two years, the source said that will depend on the SBI Caps proposal.

The meeting comes amidst talks of the airline talking to prospective foreign airlines to offload its stake.

At the last meeting on September 3 in Mumbai, the bankers had demanded that Mallya himself should make the revival plan and today's meeting is the result of that.

This is the third time that SBI Caps has been asked to prepare a rejig exercise for the airline. In 2010, it had made a debt recast plan for the airline and in November that year, its Rs 6,500 crore worth loan was recast. Earlier this, SBI Caps was asked to make another revival plan.

Kingfisher shares today climbed 8.03 per cent to close at Rs 16.96 on the BSE, after touching an intra-day high of Rs 17.18 -- the highest level in a month.

Mallya also proposed his interest in replacing the already pledged Goa Villa with another property, the source said, adding but the bankers did not take a call on that. Along with the Goa Villa, the company has pledged the Kingfisher brand worth around Rs 4,000 crore and the Kingfisher house in Mumbai with the lenders.

The meeting also comes a day after the country's largest liquor maker by volumes United Spirits, said promoter Mallya was in talks with Diageo to sell his personal stake in the company to the British liquor major. The lenders and Kingfisher management would meet in the third week of October again.

Meanwhile, industry sources said potential investors in Kingfisher are likely to be private equity players and not airlines.

Banks together have an exposure of nearly Rs 7,000 crore in the airline and the loans have all become non-performing assets since January. SBI has an exposure of Rs 1,500 crore to Kingfisher Airlines.





Shekhar Gupta
CEO
Capt. Shekhar Gupta [ Pilot, DIAM, M.Ae.S.I., MAOPA [USA] ]
shekhar@aerosoft.in 
Blog : http://shekharaerosoft.blogspot.in/ 


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