Kingfisher Air seeks freeze on loan repayment

New Delhi: The King of Good Times has fallen on bad times. Weighed down by Rs 6,000-crore debt it finds tough to service due to poor capacity utilisation and heavy losses, the Vijay Mallya-led Kingfisher Airlines has sought a two-year moratorium on all its loan repayments. The airline has also decided to convert Rs 395-crore worth unsecured loans and preference capital from the UB group into equity during this financial year.
Kingfisher Airlines has mandated SBI Caps, the merchant banking arm of the country’s largest bank State Bank of India (SBI), to restructure its finances.
Disclosing this in a presentation to investors last week, UB group chairman Vijay Mallya said the airline would also raise nearly $200 million through a global depository receipts issue this fiscal. Kingfisher Airlines has mandated Citibank, Morgan Stanley, CLSA and UBS for the fund-raising exercise, which is expected to be completed in two months.
According to analysts, the moratorium or a loan restructuring—by lowering interest rates or extending the time for repayment—will help Kingfisher only if it is done outside the corporate debt restructuring (CDR) mechanism. This is because the CDR mechanism is resorted to only when the loans turn bad. In such cases, it becomes difficult for companies to raise funds and banks must classify such loans as non-performing assets.
28/07/10 Nirbhay Kumar/Rajat Guha/Financial Express

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Categories: Kingfisher Jul 2010