Kingfisher Airlines board OKs debt recast

Kingfisher Airlines board OKs debt recast

Mumbai: Kingfisher Airlines India’s second largest carrier by market share, said on Thursday its board has approved a debt recast that seeks to convert some of its debt into equity.

The move will help the company reduce its interest burden and stem losses.

Kingfisher, controlled by United Breweries Holdings Ltd, will convert lenders’ loans of up to Rs13.55 billion into shares. It also plans to convert founders’ debt of up to Rs6.48 billion into share capital.

“While board sanction has been received from several lenders, the same is shortly expected from the others," Kingfisher said in a statement. The airline had mandated SBI Capital with the task of financial restructuring.

The Reserve Bank of India had cleared the debt restructuring proposal in September.

According to a review done by aviation consulting firm Centre for Asia Pacific Aviation earlier this year, Kingfisher’s debt burden of about $1.5 billion with interest charges accounting for about 20% of costs, has been the greatest obstacle to its turnaround.

The airline had reported a net loss of Rs2.3 billion in July-Sept narrower than the loss of Rs4.19 billion reported in the year ago period.

Kingfisher’s balance loans can be repaid to lenders over nine years with a moratorium of two years, it added.

The airline plans to issue convertible and redeemable shares to lending banks as well as founder entities in line with its debt recast plan.

It plans to issue up to 575 million redeemable preference shares and up to 780 million convertible preference shares to its consortium of lenders.

Its board also approved issuing up to 648 million convertible preference shares to founder entities United Breweries (Holdings) Ltd. and to Kingfisher Finvest India Ltd.

Under the debt restructuring package, lenders can also sanction additional funds as well as non-fund-based facilities, Kingfisher said.

The package firmed up “following a one-time relaxation in restructuring guidelines sanctioned by the Reserve Bank of India", the airline said.

Ahead of the announcement, Kingfisher Airlines shares had closed down 1.61% at Rs70.35 in a weak Mumbai market.