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INDIA-KINGFISHER-AIRLINES-SBI:Kingfisher
wins more time to stay aloft
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Embattled Kingfisher Airlines on
Thursday won more time from lenders to develop a turnaround plan while its
bankers moved ahead with the sale of two properties to recover a small fraction
of what they are owed.
Kingfisher, controlled by liquor
baron Vijay Mallya, has never made a profit in a struggling Indian airline
industry and has seen its domestic market share fall from second to last among
the six big carriers after grounding most of its fleet
They will have to come up with
concrete steps to improve operations in 15 days, otherwise we will have to take
some other actions," said an executive with State Bank of India, which
heads a consortium that met the airline on Thursday.
The banker declined to be named or
give specifics.
Kingfisher, named after Mallya's
flagship beer brand, had debt of $1.4 billion at the end of March, and most of
its banks, which are mostly state-run, declared its loans to be in default
during the December quarter.
ICICI Bank this week said it
unloaded its Kingfisher debt to a fund managed by SREI Infrastructure Finance .
Earlier this week lenders to the
carrier, worried it will fall short in its efforts to find a big investor, told
Reuters they were considering ways to recover their money including invoking
securities and guarantees against their loans.
GRAPHIC on Kingfisher:
http://graphics.thomsonreuters.com/12/07/IN_KNGFSHR0712_CC.gif
Another banker at Thursday's
meeting, which Mallya did not attend, said little was decided.
"They made a presentation; they
need fund infusion. We told them again they need to get equity up-front. We are
giving them more time but we can't give them more money," the banker said,
also declining to be identified.
Known as the "King of Good
Times" for his opulent lifestyle, Mallya owns a Formula One racing team as
well as a cricket team and is a member of India's upper house of parliament.
Shares in Kingfisher pared early
gains to close 0.42 percent higher on Thursday, in line with the market. They are
down 82 percent since the start of 2011, giving it a market value of $147
million.
WARNINGS
The government warned Kingfisher in
March that its licence to fly could be cancelled if it fails to adhere to
safety norms, which include financial viability.
Kingfisher has been hoping the
government follows through on a proposal to allow foreign carriers to own up to
49 percent of Indian airlines, but the plan has been stalled for months.
Kapil Kaul, regional head of the
Centre for Asia Pacific Aviation, said Kingfisher needs an immediate equity
injection of $500 million.
Kingfisher has scaled back its fleet
to 16 planes from 64, stopped flying overseas, and has not paid staff since
January.
"Lenders may need an informal
political go-ahead to initiate recovery and that stage has not reached.
Otherwise, process of recovery would have begun much earlier," Kaul said.
As of the end of March, Kingfisher's
controlling shareholders had pledged 90.11 percent of their holding in the
airline with lenders, while controlling shareholders of another UB group
company, United Spirits , had pledged 94.42 percent of their stake, according
to Bombay Stock Exchange data.
"The caution/patience exercised
by the lenders is largely because it will have serious consequences for all UB
group firms," said Kaul.
SALE OF PROPERTIES
Banks expect to recover about $25
million from the sale of Kingfisher properties in Mumbai and Goa, the SBI
executive said.
Kingfisher said last year its loan
repayment plan included selling its Mumbai property, Kingfisher House, at an
estimated 900 million rupees.
"We told them you have to put
these on the block and they have agreed," the SBI executive said,
referring to the Mumbai and Goa properties.
In a statement after the meeting,
Kingfisher said: "The meeting was scheduled as an update meeting and there
was no discussion on commencement of recovery proceedings."
Sharan Lillaney, aviation analyst at
Angel Broking, said the move will help Kingfisher reduce its interest burden.
"Maybe if FDI (foreign direct
investment) gets approved, and interest rates come down and the debt situation
becomes manageable, they can still run the company," he said. "It's
an unlikely scenario, but it is still possible."
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