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Corporate Jul 5, 2012

Banks consider selling Kingfisher’s non-core assets

By Firstbiz Staff

In a major setback to the beleaguered Kingfisher Airlines, banks are actively considering launching their debt recovery process.

Bankers are considering selling-off Kingfisher's non-core assets that include the Kingfisher House in Mumbai and Kingfisher chief Vijay Mallya's villa in Goa.

A formal decision in this regard was expected after a group of banks, led by the State Bank of India met on Thursday morning to review the airline's financial position. However, the meet ended inconclusive.

The much-anticipated meeting between the management of Kingfisher Airlines with the consortium of 17 banks, which have a combined stressed exposure of over Rs 7,500 crore to airline, failed to make any headway.

The meeting, held at the State Bank of India headquarters here, was attended by most of the lenders and the airlines' Chief Executive Officer Sanjay Aggarwal and Chief Financial Officer HG Raghunath.

Though the airline made a presentation, they could not commit on fresh fund infusion, according to bankers.

Lenders' sources said the meeting could not make any headway as the company could not commit on fresh fund infusion.

They said that they have appointed HDFC Securities to value two of the already pledged properties of Kingfisher - the Airline House in suburban Andheri here which has a market value of around Rs 90 crore and a villa in Goa, having a market value of Rs 30 crore.

According to banking sources, the existing 17 lenders also discussed the loan sell-off by ICICI Bank (worth Rs 430 crore) early this week to a hedge fund run by Srei Infra Finances.

Bankers, who have over 20 percent stake in the airlines following last Corporate Debt Restructuring (CDR), also said they may meet next month.

At the last meeting of the consortium in March, the bankers insisted on the promoters bringing in at least 50 percent of the fresh funding requirement (around Rs 2,000 crore) as a precondition for any new advances to the airline, after it stopped servicing its loan from January.

Lenders said they expect to recover about $24.79 million by selling Kingfisher's properties in Mumbai and Goa, adding that the airline has 15 days to come up with 'concrete steps' to improve operations.

Rumours of loan restructuring for the ailing airlines continue to float in the market.

Lenders to the cash-strapped Kingfisher Airlines said on Monday that they were losing hope it will be able to bring in outside investment anytime soon and hinted at selling assets held against their loans.

PTI

Kingfisher, which a year ago was India's No 2 airline by domestic market share, is the biggest victim of turbulence in an aviation industry where the six main carriers face a total debt load of $20 billion and $2 billion in annual losses.

It is now the smallest carrier by market share in India where the government has stalled on implementing a proposal to allow foreign carriers to invest in domestic airlines.

Even if foreign direct investment by an airline was allowed, there is no guarantee that Kingfisher, controlled by liquor baron Vijay Mallya and laden with $1.4 billion debt at the end of March, will be able to find an investor.

Kingfisher, which has slashed its schedule and is flying 16 planes, down from a peak of 64, has been late paying lenders, staff, and other bills. It last paid salaries for January, a spokesman said.

"(Mallya) keeps telling that FDI is expected, investors are coming in, but nothing has happened. It has reached a flash point. We cannot wait anymore," said an executive at a state bank owed money by Kingfisher who declined to be identified.

On Monday, one of Kingfisher's lenders, ICICI Bank, said it no longer held any debt in Kingfisher.

On Monday, local media reported a group of pilots had gone on strike demanding salary dues, although a Kingfisher spokesman said top executives were in talks with pilots over salary payments in a bid to avert a strike.

Kingfisher has been unable to find big investors willing to pump in fresh capital. A proposal to lift a ban on foreign carriers taking direct stakes in Indian airlines, potentially opening a lifeline for Kingfisher, has languished, with some of India's ruling coalition allies opposing it.

Its shares, down 82 percent in value this year, fell 1.2 percent on the day to Rs 11.95.

Kingfisher's controlling shareholders, including Mallya, have pledged 90.11 percent of their holding in the airline with lenders while controlling shareholders of another UB group company, United Spirits have pledged 94.42 percent, according to Bombay Stock Exchange data.

"The company is almost on the verge of collapse now. There is no movement on the government for allowing FDI in aviation. We want to recover our money," a senior executive at another of the airline's lenders told Reuters.

"The only possibility is invoking the guarantees. We only have UB group shares," the banker said, echoing complaints of lenders that Mallya has been unwilling to make additional personal guarantees.

Kingfisher lenders include Bank of Baroda, Bank of India, Central Bank of India , IDBI Bank, Punjab National Bank, and UCO Bank. Most listed their Kingfisher loans as non-performing in the December quarter.

With inputs from Reuters

by Firstbiz Staff

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