The country’s largest bank, the State Bank of India (SBI), has decided to extend a Rs 1,650-crore relief package — smelling strongly of a bailout that the government said it had no plans to give — to liquor baron Vijay Mallya’s bleeding Kingfisher Airlines (KFA).
The government-controlled bank, which has been resisting a lenient view of the airline that has seen a spate of flight cancellations, an exodus of pilots and worried bankers during the past few days, suddenly turned benign.
The bank gave no reasons for the sudden change of heart despite a Rs 7,057-crore outstanding loan on the company’s balance sheet. This also comes in the backdrop of aviation minister Ajit Singh’s statement on Monday that the government was not going to ask banks to bail out any private airline.
Asked about the new loan package, SBI chairman Pratip Chaudhuri told Hindustan Times: “I cannot share client confidentiality. I will neither say yes nor say no.”
The KFA spokesperson did not respond to HT’s emails, text messages or phone calls.
But a source confirmed that the bank had decided to extend a new line of credit that included Rs 700 crore as short-term working capital loans and Rs 500 crore as bank guarantees as a cover for the airline’s payables to vendors. SBI has also decided to extend the tenure of the existing loans of Rs 250-300 crore that would be due for repayment next year.
Besides, SBI or Punjab National Bank (PNB) is likely to offer bank guarantees of Rs 160-200 crore to the income tax (I-T) department, the source said.
The I-T department will de-freeze the airline’s bank accounts, which it had attached, once these bank guarantees come in by Wednesd“Attachment” implies the airline cannot operate the bank account unless it clears statutory dues to the tax department.
The airline failed to deposit the tax deducted from salaries and vendors dues with the income tax authorities for close to two years, leaving the tax authorities with no other option.
Meanwhile, in a Bombay Stock Exchange filing on Tuesday, Mallya increased the share capital of KFA by Rs 60 crore to Rs 577 crore, which will allow him to borrow more to bring the airline from the brink of closure.
Last year, KFA implemented a debt-recast package after which loans valued at Rs 1,300 crore were converted into share capital and a consortium of 13 lenders, led by the SBI, had picked up a 23.21 % stake in the airline.Corporate affairs minister Veerappa Moily has also come out in support of the airline, saying the carrier "has to be saved".
“Of course he (Vijay Mallya) has met me because he hails from Karnataka... That (Kingfisher) has to be saved. He has to work out a strategy that will be acceptable to the finance minister and his ministry. He has a vibrant airline. And it has given excellent service... I wish him well," Moily said.