Banks want Mallya to pledge other Kingfisher brands

Kingfisher Airlines’ turnaround plan to be presented today

New Delhi, Sept. 26:  

The 17-bank consortium that funded Kingfisher Airlines (KFA) will on Thursday urge the ailing airline’s promoter Vijay Mallya to pledge other Kingfisher brands as collateral, such as beer, mineral water and music CDs.

This will be done when Mallya meets the consortium bankers’ at Bangalore for a presentation on how he plans to turnaround the airline, sources in the banking industry said.

Currently, the Kingfisher Airlines is the only brand that has been charged with the banks.

Now, the banks are looking to bring other Kingfisher brands as charge under their fold, including the market leading Kingfisher beer brand. The other brands sought to be brought under charge could be those relating to mineral water and music CDs.

The proposal to extend charge to other brands in the group comes in the wake of erosion in the security value on banks’ existing exposure to KFA.

“The issue of extending charge to other Kingfisher brands is part of the agenda of Thursday’s meeting,” said a banker, who requested anonymity.

Mallya is expected to spell out in his presentation how further equity funds will be pumped into the private carrier.

He is also likely to present a roadmap for time-bound reduction in liabilities to the banking system.

The issue of alternate source of funds in case foreign equity (including from foreign airline) does not materialise will also be discussed, it is learnt.

Against a net exposure of about Rs 6,339 crore, the total value of pooled security available with the banks was Rs 5,213 crore, it is learnt. This translates into security coverage of about 82 per cent.

Kingfisher Airlines brand was the only intangible and all other assets were physical assets on which charge was created.

An international consulting firm had in April 2010 valued the Kingfisher Airlines brand at Rs 4,111 crore.

The continuing losses incurred by the private airline has eroded the security value, especially in the recent years, compelling the consortium to seek extension of charge to other Kingfisher brands, it is learnt.

At Thursday’s meeting, Mallya is expected to spell out the progress on sale of non-core assets — Kingfisher House at Mumbai and promoter’s Villa in Goa.

Bankers have already opposed its proposal to substitute the charge of promoters’ villa in Goa with another asset.

The future course of action by banks in the KFA case would largely depend on how soon the promoter is able to bring capital into the airline.

http://www.thehindubusinessline.com/todays-paper/tp-corporate/article3939703.ece