Bankers ask Kingfisher to infuse Rs 800 cr fresh equity

Closure too can't be ruled, Mallya not prepared to run on loss-making routes

sweta-ranjan

Sweta Ranjan | November 14, 2011



Bankers to the cash-strapped Kingfisher airline on Monday asked its promoters to infuse Rs 800 crore worth of fresh equity if they are to consider a second restructuring of existing debt, as opposition mounted to any bailout of the private carrier.

The Kingfisher Board also had a crucial meeting in Mumbai to work out a debt restructuring plan on the eve of the announcement of its latest financial results. The bankers have asked the troubled airline to come out with a "credible" plan.

The lenders--a 13-bank consortium led by SBI, who were yet to decide on ways to soften the troubled airline's Rs 7057.08 crore debt burden, are due to meet Kingfisher management here on Tuesday.

The bankers have made it clear that the promoters have to put in at least Rs 800 crore worth of fresh equity as the lenders cannot act as promoters of the airline.

"Bankers want more information on their fleet, equity, continuation of fuel supply. Banks can come in as lenders not promoter. We will respond how it unfolds," said Pratip Chaudhuri, chairman of SBI which leads the 13-bank consortium that has financed Kingfisher.

On whether the bank will consider making fresh advances to Kingfisher, SBI managing director Hemant Contractor said, "We have to be satisfied about the viability of the company.

There is no point restructuring if the company's operations are not going to be viable.

"We have asked them to come up with some fresh funds if the banks are to at all consider their request for restructuring. We want to see more funds coming from the company itself", SBI has the largest exposure to Kingfisher--Rs 1,400 crore--among the lenders.

Amid the debate over bailout for Kingfisher, SpiceJet chief Neil Mills said the government should not use taxpayers' money to revive a private sector company.

Mallya on his part said he is not seeking taxpayers money.

"No bail out involving tax payers money. We want working capital management assistance." he said in his latest tweet.

The debt-ridden airline continued with flight cancellations for the eighth straight day. The airline did not operate at least 40 flights today.

Besides SBI, the consortium includes ICICI Bank, IDBI Bank, Punjab National Bank, Bank of Baroda, Bank of India, UCO Bank, Oriental Bank of Commerce and State Bank of Mysore.

Together, these banks now hold a 23.4 per cent stake in the airlines and have an exposure of over Rs 7,700 crore.

The airline has suffered a loss of Rs 1,027 crore in 2010-11 and has a mounting debt of Rs 7057.08 crore. According to industry estimates, Kingfisher is losing about Rs 3-4 crore a day due to the flight cancellations.

The lessors, who arrange aircraft on long-term leases for companies, have been negotiating with Kingfisher for the past few days reportedly after the airline delayed payments on some aircraft.

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Kingfisher board meets today to decide on the airline's fate

The fate of Kingfisher Airlines, the premier luxurious airline which is facing severe financial crunch, will be decided on Monday. sources say that in the airline’s board members are meeting on Monday to decide on its fate and a closure is on the cards.

They say that Kingfisher’s billionaire owner Vijay Mallya does not want to keep the airline alive as the company is facing cash crunch.

Kingfisher Airlines chairman Vijay Mallya on Saturday expressed his frustration in his tweet: “Is it Kingfisher’s duty to fly on loss-making routes when state governments tax heavily? Or should we be financially prudent and fly profitably?” This tweet came hours after civil aviation minister Vayalar Ravi ruled out a debt recast for Kingfisher.

The liquor baron also expressed his frustration at the government. In another tweet, he wondered, “Every government has gone out of the way to support airlines and connectivity. In India, airlines are overtaxed and overcharged. Wonder why?”

The government had made it clear on Saturday that “No bailout package is pending before the government nor has been proposed by the ministry of civil aviation for Kingfisher Airlines”.

The government is, however, examining the possibility of encouraging banks to provide quick financial assistance in the form of loans to Kingfisher Airlines.

Kingfisher had on Friday expressed apologies to both the director general of civil aviation (DGCA) and passengers for cancellation of flights that caused inconvenience to thousands of its passengers. The airline had shot an email to its dedicated flyers that it had decided to “rationalise network, drop unprofitable flights and expedite its fleet reconfiguration”.

Kingfisher Airlines had a loss of nearly Rs 1,000 crore in the current financial year. The airlines has to repay a bank loan of Rs 7,000 crore. The airline also owes huge debt to the oil companies.

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SBI asks Kingfisher to raise fresh equity before debt recast

State Bank of India, which has the largest exposure to crisis-ridden Kingfisher Airlines, on Monday said it has asked the carrier to raise fresh equity to the tune of Rs 800-1,000 crore if banks are to consider a second restructuring of existing debt or extend fresh advances.

On whether the bank will consider making fresh advances to Kingfisher, SBI managing director Hemant Contractor said, "We have to be satisfied about the viability of the company.

There is no point restructuring if the company's operations are not going to be viable.

"We have asked them to come up with some fresh funds if the banks are to at all consider their request for restructuring. We want to see more funds coming from the company itself..."

The amount that the carrier should raise is about Rs 800-1,000 crore, Contractor told reporters on the sidelines of the WEF-CII organised India Economic Summit in Mumbai.

When asked whether banks have asked the airline to sell some of its assets to reduce its debt of over Rs 7,000 crore, Contractor said, "One thing that is being discussed is selling some of its assets. If they do, it is good or they would have to find some other means."

He also informed that SBI has Rs 1,400 crore exposure to the airline and that is a standard asset as of now. He was quick to add, "If the restructuring is successful, we will be able to maintain the current status."

Meanwhile, an official of the Vijay Mallya-promoted airline told PTI that the airline board is meeting in Mumbai to take stock of the situation.

When asked whether bankers have set a timeframe for the airline to raise the funds, Contractor declined comment.

Meanwhile, Yes Bank managing director and CEO Rana Kapoor called for concerted efforts by the government to salvage the crisis-ridden airline industry, as it is critical for the economy.

"This is an industry, and KF included, that needs a very strong dose of support, I think the government need to do something strategic like allowing FDI or loan restructuring, or by repricing ATF," Kapoor said.

A clutch of banks led by SBI and ICICI have lent nearly Rs 7,000 crore to the airline. Out of this, around Rs 1,500 crore was restructured last November

Started in May, 2005, the airline has never made a profit and is yet to announce its Q2 numbers.

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(PTI) Govt bailout for Kingfisher defies logic, says Spicejet chief

Amid the debate over bailout for private carrier Kingfisher Airlines, SpiceJet chief Neil Mills today said the government should not use taxpayers' money to revive a private sector company.

"It is the private sector. Why should there be any bailout for a private air carrier. I do not see any logic why taxpayer's money should be used to bail out a private company," Mills told PTI when asked whether the government should bail out Kingfisher Airlines.

Earlier, prime minister Manmohan Singh had said that steps would have to be taken to help the private sector entities if they get into difficulties.

Kingfisher Airlines chief Vijay Mallya had sought government help for meeting the financial challenges caused at the airline because of rising costs and high debt burden.

The airline has also approached lenders for a reappraisal of working capital requirements following a surge in price of jet fuel in recent months.

Yesterday, top industrialist Rahul Bajaj has strongly opposed any bailout attempt by the government for the debt-ridden Kingfisher, saying "those who die, must die" in a free economy.

Political parties have also been opposing the idea of a bailout package for Kingfisher.

Kingfisher has suffered a loss of Rs 1,027 crore in 2010-11 and has a mounting debt of Rs 7,057.08 crore.

The beleaguered airline has cancelled 210 flights since Monday, due to factors like increased costs.

Spicejet, a low-cost carrier, has itself posted a net loss of Rs 240 crore for the second quarter of the fiscal, on spiralling fuel prices and a weakening rupee. Another private airline Jet Airways too posted a loss of Rs 730.60 crore for the same quarter.

(PTI) Badal slams UPA govt on Kingfisher bailout issue

Punjab chief minister Parkash Singh Badal today assailed the Congress-led UPA after prime minister Manmohan Singh said the government would explore ways to help Kingfisher airlines.

He strongly opposed any bailout attempt by the government for the debt-ridden private sector entity saying it would be sheer waste of tax payers' money.

Badal told reporters that the UPA, which had assumed power in the name of common man, was doing nothing for their welfare but was extending largesse to the private companies at the cost of the agony of the poor man.

He alleged that all policies adopted by the Union government were pro-rich and have nothing to do for welfare of the poor.

"Its surprising that Union government was worried about the prospects of Kingfisher airlines but is not at all bothered about the woes of the common man suffering due to inflation," he added.
 

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