Mallya arm pledges big chunk of USL to fund KF

Bangalore/Mumbai: United Breweries Holdings (UBHL) — the investment vehicle of Vijay Mallya — has given about 81% of its stake in whisky maker United Spirits (USL) as corporate guarantee to help loss-making group firm Kingfisher Airlines raise money for expansion plans. Of around 34% that Mr Mallya owns in USL through UBHL, around 27.8% has been provided as guarantee to lenders such as IDFC, IL&FS, Citigroup and ICICI Bank.
USL, which was in the spotlight last week after a poor performance and a steep fall in stock price, has also pledged about 17.2% of its shares to raise money for the acquisition of Shaw Wallace & Co and the UK-based Whyte & Mackay. Of this, 12.7% comprises treasury stock, which resulted from the merger of McDowell & Co and Herbertsons and is being held in a trust.
Another 4.5% held in USL by its subsidiaries has also been pledged with lenders.
These two moves have helped the beer-to-real estate UB group raise around Rs 6,900 crore to fund USL’s acquisitions. Kingfisher Airlines has also used the corporate guarantee to raise money for its expansion plans and to buy out Deccan Aviation. The pledges and the corporate guarantee comprise about 44% of USL’s fully-diluted equity base after the Shaw Wallace merger. ET has secured the exact details of the shares pledged with lenders after extensive discussions with the lenders, UB group officials and Mr Mallya himself. Last week, USL shares slumped dramatically in the market on concern among investors over the percentage of USL equity pledged with lenders. The shares were also reacting to USL’s poor third-quarter performance which company officials said was caused by a sharp rise in prices of molasses, a key raw material.
Speaking to ET, Mr Mallya sought to douse any concerns among investors.
25/01/09 Boby Kurian & George Smith Alexander/Economic Times

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Categories: Kingfisher Jan 2009