Mumbai: A consortium of lenders, including the State Bank of India, has agreed to give Vijay Mallya, promoter and chairman of debt-laden Kingfisher Airlines Ltd, one more month to prepare a plan of action to service the airline’s ballooning debt.
The lenders, who took this decision at a two-and-a-half hour meeting in Bangalore on Thursday, will now meet the airline management in the third week of October in Mumbai or Bangalore, according to three bank executives who requested anonymity.
Investment bank SBI Capital Markets Ltd was asked to prepare a “basic operating plan” for the airline to stay afloat till the next lenders’ meet, the three bank executives said, since the banks refused to pump in fresh money in the airline.
The executives said the consortium was insisting on selling the Kingfisher house in Mumbai and a villa in Goa to service the debt, rather than wait for a stake sale of the airline’s parent units or anticipate foreign direct investment by global carriers. However, Mallya, who was present at the meeting, requested for a month’s time, they added.
Others at the meeting included United Breweries (UB) group president and chief financial officer Ravi Nedungadi, UB group deputy president A. Harish Bhat, Kingfisher Airlines chief executive officer Sanjay Aggarwal and the airline’s chief financial officer A. Raghunathan, said the bank executives.
A Kingfisher Airlines spokesperson declined to comment on the story.
Mallya made the presentation in person, said the executives. “Vijay Mallya came with a presentation which comprised nothing much but what the government has done for the aviation sector. He asked for some time so that they can do something taking advantage of the situation. He has asked banks to give him some more time, which the bankers see as a third restructuring,” said one of the bankers who attended the meet.
“The restructuring is basically to delay the repayment schedule, etc. and SBI Caps will work on it. However, bankers have not shown any commitment. Anyway, it (the loan) is a non-performing asset already. We have no choice,” he said.
An SBI Capital executive did not offer any comments for the story. He added the good news is that Mallya came in person, which is an indication that the company is serious about the issue.
Rashesh Shah, a senior analyst with ICICI Securities Ltd, wrote in a report dated 14 August that going forward, it will be a very tough job for the company to operate with such a reduced fleet size and massive debt pile of over Rs.8,000 crore.
“The company has been suffering due to a severe liquidity crisis on account of heavy operational losses and difficulty in getting additional funds from banks. We believe a significant fund infusion by the Kingfisher Airlines promoter through foreign direct investment or by themselves remains very crucial for running the business, going forward,” Shah wrote.
Shares of Kingfisher Airlines on Thursday ended trading at Rs.16.96 a piece on BSE, up 8.03%, while the 30-share benchmark Sensex shed 0.28%. The lenders’ meeting took place during market hours. The holding company of UB Group, United Breweries Holdings Ltd’s shares also rose 1.85% to close at Rs.146.05.
Separately, BSE on Thursday halved its circuit limits on the shares of Kingfisher Airlines and group firm United Breweries Holdings, capping their maximum movement in a day at 5% and 10%, respectively.