Mallya lends Rs2,000 cr for Kingfisher

Mumbai: The country’s largest private carrier by passengers carried, Kingfisher Airlines Ltd, is set to get an immediate relief as a group of banks have agreed to lend Rs2,000 crore to the cash-starved airline. India’s largest lender, State Bank of India (SBI), has already disbursed Rs900 crore, while Bank of Baroda and a few other banks are in the process of disbursing the rest of the amount.
In mid-2008, Kingfisher Airlines had received a Rs1,000 crore loan from private lender ICICI Bank Ltd.
This time, the airline’s chairman, Vijay Mallya, has extended a personal guarantee to secure the loan, said a senior banker closely associated with the deal. He did not want to be named as banks are not supposed to disclose details of specific transactions.
A personal guarantee is a promise made by an entrepreneur to personally repay the company’s debts in the event of default. Instances of banks asking for personal guarantees from promoters are not rare. But normally, such guarantees have been asked from not-so-well-known promoters, particularly of small and medium enterprises.
“Out of Rs2,000 crore, we have got half of the money. The remaining is on its way,” said a senior Kingfisher Airlines executive, who did not want to be identified. Mint could not independently verify the details of the transaction with all banks involved.
Kingfisher Airlines has been struggling to get funds from banks, which are not keen on lending to companies in India’s ailing aviation sector that has witnessed a 10% slump in passenger traffic in 2008-09.
In December, rival carrier Jet Airways (India) Ltd had raised Rs1,250 crore from Punjab National Bank and Indian Overseas Bank to meet its working capital requirements.
For raising the loan, Jet Airways had pledged its international ticket sales, which means its international tickets are being used to pay the debt. Jet Airways flies to top international destinations such as the US, Europe as well as South-East Asia and West Asia.
Another full service airline, state-run National Aviation Co. of India Ltd (Nacil) that runs Air India, is also looking to raise $1 billion (Rs4,680 crore) to fund its expansion plan.
04/05/09 P.R. Sanjai/Livemint

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Categories: Kingfisher Jun 2009