Debt recast nod: breather for Kingfisher Airlines

Kingfisher Airlines Ltd announced last Thursday, after market hours, that the company’s board of directors have approved a debt recast package. This comes as a big relief for a company that reported loan funds of more than Rs.8,000 crore as on 30 September, 2010. In comparison, the company’s market capitalization is less than Rs.1,750 crore.
The debt recast would involve converting lender debt up to Rs.1,355 crore and promoter debt up to Rs.648 crore into share capital. Kingfisher’s profitability would improve, thanks to the lower interest burden. Interest costs accounted for a whopping 21% of revenue last fiscal.
Because of the high interest burden, the company has been reporting a net loss even after turning profitable at the operating level this year. The company posted operating profit of Rs.4 crore in the half year ended September after suffering a huge operating loss of Rs.900 crore in the previous fiscal. At the net profit level, Kingfisher reported a loss of Rs.418 crore for the half year ended September, compared with a net loss of Rs.1,647 crore in the last fiscal.
Under the debt recast, the repayment of the remaining debt to lenders has been rescheduled over nine years with a moratorium of two years. Reports suggest that the terms with the banks include a credit line as well. In lieu of the debt, Kingfisher would issue different types of preference shares and optionally convertible debentures.
29/11/10 Pallavi Pengonda/Live Mint

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Categories: Kingfisher Nov 2010