Corporate Feb 12, 2013
Mumbai: Kingfisher lenders today finally decided to start the recovery process for Rs 7,500-crore loans given to the grounded airline, a top official of State Bank of India said today.
"We have decided to recall (initiating the recovery process) the loans given to Kingfisher Airlines. However, each bank board will decide the future course of action," SBI Deputy Managing Director (Mid-Corporates) Shymal Acharya told reporters here after a two-hour meeting of bankers with company representatives.
The meeting was attended by five bankers, led by SBI, and the airline's management, including CEO Sanjay Agarwal and UB Group President and CFO Ravi Nedungadi. The decision comes even as Kingfisher Chairman Vijay Mallya has promised to airline employees about clearing their salaries for 11 months and has assured of restarting operations with the forthcoming summer schedule.
"No progress has been made so far by the airline management to restart operations, and the bankers feel that enough time has been given to the company," Acharya said. He admitted that banks will have to "take a hair cut", meaning the difference between the market value of the collateral and value assessed by the lender. He, however, did not specify to what extent.
The exposure of banks to the troubled carrier runs into Rs 6,360 crore. Unpaid interest and compounded interest take it to over Rs 7,500 crore. SBI, the leader of the consortium of lenders, has the maximum exposure with Rs 1,600 crore, followed by Punjab National Bank with Rs 800 crore, IDBI Bank Rs 800 crore, Bank of India Rs 650 crore and Bank of Baroda Rs 550 crore.
Kingfisher has been grounded since October 1 last after a labour unrest due to non-payment of salaries which have not been paid since last May.
Others banks like United Bank of India has Rs 430 crore, Central Bank of India (Rs 410 crore), Uco Bank (Rs 320 crore), Corporation Bank (Rs 310 crore), State Bank of Mysore, (Rs 150 crore), Indian Overseas Bank (Rs 140 crore), Federal Bank (Rs 90 crore), Punjab & Sind Bank (Rs 60 crore) and Axis Bank (Rs 50 crore).
Lenders outside the consortium are Srei Infrastructure Finance (Rs 430 crore), Jammu & Kashmir Bank (Rs 80 crore) and Oriental Bank of Commerce (Rs 50 crore). Banks were hopeful that some money would flow into the airline after Mallya sealed Rs 11,100 crore Diageo deal by selling majority stake in his liquor business United Spirits.
Mallya had, however, said these are two different companies. The bankers were also banking on some equity infusion into the airline by a foreign player following the enabling regulatory environment, but the airline has not been able to find an investor so far.
All the 17 banks have provided for their exposure to the airline and declared them as bad loans. Since Januray 2012, the airline has not been servicing the loan. It is clear that banks will have take deeper cuts as the airline has not given practically anything in quarantees. The airline has pledged the Kingfisher Villa in Goa and the Kingfisher House in Mumbai, which may at best fetch Rs 300 crore to the lenders apart from some personal guarantee by Mallya.
The airline is sitting on a debt of over Rs 7,500 crore in banks loans, and over 10,000 crore in accumulated losses and unpaid salaries, taxes, and vendor dues.
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