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Kingfisher cuts debt; to raise funds when crude stable

Kingfisher cuts debt; to raise funds when crude stable
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First Published: Tue, Apr 05 2011. 01 19 PM IST
Updated: Tue, Apr 05 2011. 01 19 PM IST
Mumbai: Kingfisher Airlines has brought down its debt as part of a debt restructuring process and would prefer to wait for crude prices to stabilise before raising fresh funds for expansion, a top group official told Reuters on Tuesday.
“The fact of the matter is markets are a bit volatile. The Middle-East situation has caused an unexpected spurt in crude prices which is not structural in nature, but as long as it is there markets are a little spooked,” said Ravi Nedungadi, chief financial officer of UB Group, which controls Kingfisher.
Oil prices rose to their highest since 2008 on Monday, with Brent surging above $121 a barrel as Nigerian election delays and a short-lived strike in Gabon joined a list of geopolitical supply concerns. Libya’s ongoing civil war and the latest signs of unrest in Yemen also affected the European market more intensely.
“It is unwise for us to go and raise capital when market conditions are like that, but we are all set to go and the moment there is a window of opportunity we will,” Nedungadi said.
The airline has restructured its debt by converting almost Rs1,200 crore of loans into equity and its current debt stands at about Rs6,000 crore, he added.
Kingfisher chairman Vijay Mallya had last year announced plans to raise $250 to $350 million through global depositary receipts. Last September, the airline received board approval to raise up to $1 billion through various means including rights issue, preferential issue or GDRs.
“The debt restructuring and conversion of debt into equity has happened, so the balance sheet is restructured. So there is no desperate urgency to test the market appetite in such uncertain conditions,” Nedungadi said.
On 31 March, the airline had issued 116.3 million shares to a consortium of 13 banks led by State Bank of India , after conversion of compulsory convertible preference shares at Rs64.48 a share.
Kingfisher also allotted shares to founder entities United Breweries (Holdings) Ltd and Kingfisher Finvest India.
Profits on Course
Loss-making Kingfisher, India’s second largest airline by market share, has seen buoyant passenger traffic in Asia’s third largest economy and expects to breakeven and make a “small profit” in FY12, its first since it listed on the bourses.
“As far as Indian conditions are concerned there is no slowdown. Passenger traffic is growing between 15 and 20% and the pace is accelerating,” Nedungadi said.
“This is linked more to the level of economic activity and growth because 90% of (air) travel in India is non-discretionary. People are travelling on work.”
The airline plans to add eight leased aircraft to its fleet by October, it had said in January. Also, re-induction of several A320 aircraft which were grounded due to technical issues last year would mean an effective increase in capacity of more than 20%, Nedungadi said.
“For the last 12-14 months we have had a number of our planes sitting on ground for technical reasons. Those have now come back. So we have an effective increase in capacity of around 20-23%,” he said.
As a result, Kingfisher plans to increase frequency mainly on domestic routes and also some nearby international destinations like Middle East, Thailand and Sri Lanka, he said.
“Our primary focus is on reconnecting certain routes which we had taken off and increasing frequency on some routes where frequencies had been reduced”.
He also said yields have improved despite the rise in crude as the airline was able to raise fuel surcharge to meet expenses.
At 12:29 p.m., Kingfisher shares were up 2.37% at Rs45.3 in a weak Mumbai market. They had risen as much as 4.6% earlier in the day.
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First Published: Tue, Apr 05 2011. 01 19 PM IST
More Topics: Kingfisher Airlines | Debt | Funds | Crude | UB Group |