KFA crisis: Airline hits the bottle | india | Hindustan Times
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KFA crisis: Airline hits the bottle

india Updated: Aug 10, 2012 00:45 IST
Tushar Srivastava
Tushar Srivastava
Hindustan Times
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Banks have begun digging into the pockets of UB Holdings, flagship of Kingfisher Airlines owner Vijay Mallya's liquor business, as the airline is now struggling to meet even its basic needs.

"Certain aircraft lessors and bankers have invoked the corporate guarantees given by the company (UB Holdings) on behalf of KFA," UB Holdings said in its quarterly results filed on the Bombay Stock Exchange.

The company provided guarantees of Rs. 8,919.86 crore to KFA's banks and aircraft lessors as part of the master debt-recast agreement through which a consortium of 13 lenders picked up a 23.21% stake in the airline in March 2011.

Under the deal, shares held by the promoter group were pledged with the banks by KFA's holding companies, UB Holdings and Kingfisher Finvest.

UB said the total amount invoked and the outstanding on June 30 was Rs. 835.77 crore, but an airline spokesperson claimed none of the lending banks had invoked guarantees.

The airline requires an immediate capital infusion of about $600 million (Rs. 3,300 crore), most of which have to come from UB, although draining out the flagship can dent Mallya's expansion plans for the spirits business.

"The invoking of guarantees by lessors is not surprising. Promoters, including banks, need to take a decision on the future of KFA," said Kapil Kaul, South Asia CEO of aviation consultancy firm Centre for Asia Pacific Aviation.

The disclosure came on the second day of a strike by some KFA staff protesting non-payment of salaries for five months. Mallya, meanwhile, told the strikers in a letter that they could leave if they wished.