Friday 28 September 2012

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
Capt. Shekhar Gupta [ Pilot, DIAM, M.Ae.S.I., MAOPA [USA] ] 
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