Kingfisher looks for way out, banks lay down terms
The bankers' consortium will meet the management of the Vijay Mallya-led Kingfisher Airlines board today, demanding that the liquor baron commit up to Rs 1,000 crore from UB Group to show the promoters' seriousness in turning around the airline. HT reports. No headway | Creditors to meet todayindia Updated: Nov 15, 2011 09:03 IST
The Kingfisher Airlines board meeting on Monday ended inconclusively though it discussed a slew of options to mop up Rs 1,000 crore for the carrier reeling under a severe cash crunch and a Rs 7,057.8-crore debt.
The State Bank of India - that leads the 13-bank consortium holding a 23% stake in the airline - had set a precondition that the Kingfisher management infuse this amount before the banks considered further lending.
The bankers' consortium will meet the management of the Vijay Mallya-led Kingfisher Airlines board on Tuesday, demanding that the liquor baron commit up to Rs 1,000 crore from UB Group to show the promoters' seriousness in turning around the airline.
Preferential allotment of preference shares, conversion of loans from the parent, UB Group, into equity and selling stake to a strategic investor were the options that the board is believed to have focused on.
Companies, which need money but cannot or are unwilling to raise a loan, issue preference shares. Promoters, banks and financial institutions buy the shares and the money appears in the company's books as 'capital', and not as debt.
If the company closes down, the preference shareholders are the second - after the lenders - to get back their money from liquidation of assets.
There were also reports that the management was considering sale of property to raise resources for the airline, which never made a profit since its inception in 2005.
"Debt restructuring does look a bit challenging … The company may bring in a strategic investor. The valuations are attractive now since the aviation market in India is growing at over 15% per annum," said Amber Dubey, director (aviation), KPMG, a consulting major.
The airline cancelled more than 200 flights in the past week, stoking fears that it could go bankrupt. The management said high fuel prices, interest costs and unprofitable domestic and international operations were to blame for the poor performance of the company.