Kingfisher lenders hope airline mgmt won't let go belly up

The banker said: "None of us wants the airline to go bust. If that happens, banks will be a bigger casualty than the airline."

Updated: Oct 03, 2012, 21:28 PM IST

Mumbai: Kingfisher lenders on Wednesday expressed the hope that the company management will not let the airline go belly up and said banks would be a bigger casualty if it goes bust.

"We (the lenders) are for seeing the airline turn around and not getting grounded. We hope the promoters won't let the present crisis get more complicated. After all, we don't think chairman Vijay Mallya will let his image be tarnished by letting the airline go belly up," a senior official of a public sector bank said here this evening.

The banker said: "None of us wants the airline to go bust. If that happens, banks will be a bigger casualty than the airline."

When asked about whether banks are looking at recovery measures by monetising the collaterals, the banker said by doing that the lenders won't be able to recover not even 10 percent of their outstanding to the airline.

The Vijay Mallya-owned airline and its promoters have most of their shares and assets pledged with banks, including the brand Kingfisher (pledged for a value of Rs 4,100 crore) and two of its properties--the Kingfisher Villa in Goa and the Kingfisher House in Mumbai, together valued at around Rs 200 crore.

"We hope the talks that Mallya is holding for stake sale in his other concerns like United Spirits (with UK's Diageo) will fructify soon. If that happens Mallya could recapitalise the airline and then we bankers can look at recasting his existing loan or even fund fresh working capital requirements," the banker said.

When asked about the amount that banks are looking at as fresh capital infusion by the airline for a fresh lifeline, he said normally a CDR involves the promoters bringing in at least 25-30 percent of the overall CDR package in fresh equity. At 25 percent, this works out to be around Rs 1,750 crore as the airline's outstanding principal alone is over Rs 7,000 crore.

ICICI Bank had an exposure of Rs 400 crore to Kingfisher in June, but sold out loan.

That apart, the lenders together hold around 23 percent in the airline since March, after the banks converted their Rs 6,500 crore of recast debt (after the November 2010 CDR) into equity.

These banks picked these stakes at a hefty premium- when the share was trading at Rs 38, the banks converted these shares at Rs 64.48 per share. Its shares closed at Rs 14.60 today, down 5 percent. It had touched a low of Rs 7.01 in August.

A senior official at the State Bank, which has an exposure of Rs 1,580 crore and unpaid interest from January, said if the crisis deepens, the consortium of lenders together will decide what course of action should be taken.

"Though we are the lead the 17-bank consortium of lenders to Kingfisher, we cannot take a unilateral decision. We will have to get the rest of the lenders on board for any concrete action," the SBI official said.

When asked whether the lenders are looking at beginning recovery process, the official said the banks will ensure that they will use every means to protect their interest.

The crisis at Kingfisher worsened on Wednesday as reconciliation talks between the management and the striking engineers and pilots over payment of seven months salary dues failed with the protestors rejecting the offer of part-payment and vowing to continue their agitation.

With no end to the deadlock, a question mark hung over the airline's plans to resume operations from Friday, after a four-day partial lockout and complete suspension of all operations since Monday night.

Kingfisher has been saddled with a huge loss of over Rs 8,000 crore and a debt burden of over Rs 7,000 crore.

After declaring a partial lockout till October 4 following the strike by engineers and pilots over non-payment of salary, the airline CEO Agarwal had expressed confidence about resolving the situation in the next few days. "We will take a call on October 4 on resumption of our operations."

The airline would be using its current fleet of ten aircraft -- seven Airbus A-320s and three turbo-prop ATRs, to resume flights. With these planes, Kingfisher has been operating about 70-80 flights each day till it suspended all operations on Monday night.

Over 80 pilots and 270 Kingfisher engineers have been on intermittent strikes over the past few months, primarily over delay in payment of salaries.