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Kingfisher to restructure debt, consults Seabury on five-year plan

Kingfisher to restructure debt, consults Seabury on five-year plan
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First Published: Tue, Mar 23 2010. 09 45 PM IST

Heavy burden: A file photo of Kingfisher aircraft at Bangalore airport. The loss-making airline has Rs7,415 crore of debt. Hemant Mishra/Mint
Heavy burden: A file photo of Kingfisher aircraft at Bangalore airport. The loss-making airline has Rs7,415 crore of debt. Hemant Mishra/Mint
Updated: Tue, Mar 23 2010. 09 45 PM IST
New Delhi: The country’s second biggest carrier by passengers, Kingfisher Airlines Ltd, has in a recent presentation to investors outlined plans to reduce its debt and revealed that it has asked US-based consulting firm Seabury to draw up a five-year business plan.
Heavy burden: A file photo of Kingfisher aircraft at Bangalore airport. The loss-making airline has Rs7,415 crore of debt. Hemant Mishra/Mint
The loss-making airline has Rs7,415 crore of debt. The presentation shows interest costs shot up 55%, from Rs529 crore in the first three quarters of FY09 to Rs818 crore the same months of the current fiscal year, even as revenues shrank 9% to Rs3,819 crore. The airlines’ interest costs were one-fifth of operating revenues for April-December 2009.
The carrier had a tough last year, defaulting on payments to vendors including oil firms.
In its presentation, now available on the parent UB Group website, the airline also said it will cut costs in the coming fiscal through “rationalizing distribution costs, reduction in expat pilots, renegotiating...renewal of operating leases at 20% discount, additional operational efficiencies (fuel consumption, overheads)”. While how the airline plans to reduce its debt is not clear, the UB Group on Monday sold its 10.27% stake in Aventis Pharma Ltd, the Indian subsidiary of French multinational drug maker Sanofi-Aventis SA, for around Rs414 crore.
UB Group chairman Vijay Mallya said in February that the carrier was planning to raise funds through global depository receipts and a rights issue over the next 8-10 weeks. The size of the issue is yet to be announced. A marginal improvement in yields, reduced seat capacity in the market and a return of growth will help generate more revenue, the carrier said in its pitch.
Analysts said restructuring of debt is critical. “(T)he carrier, like its peers, must induct additional equity and reduce the interest burden,” Centre for Asia Pacific Aviation (Capa), said in its 2010 outlook for the Mumbai-based carrier, which flies 66 aircrafts. Capa expects that “the promoters will also infuse substantial fresh capital” and “deleverage the balance sheet to an extent that will permit debt to be increased further.”
Kingfisher’s stock closed at Rs48.25 a share on the Bombay Stock Exchange on Tuesday when the benchmark Sensex rose 0.23%.
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First Published: Tue, Mar 23 2010. 09 45 PM IST
More Topics: Kingfisher | Restructuring | Debt | Seabury | UB Group |