Kingfisher ’s interest burden to be reduced

Kingfisher Airlines Ltd’s move to restructure debt will help it save crores of rupees and plan the future with more certainty, but India’s second largest airline by passengers carried should guard against adding fresh debt and losing senior executives, analysts said.
The Vijay Mallya-owned carrier has accumulated debt of Rs.7,000 crore and some of its planes are grounded. It appointed SBI Capital Markets Ltd to restructure part of its debt.
On 25 November, the airline informed stock exchanges that it has approved a debt recast package with lenders following a one-time relaxation in restructuring guidelines by the Reserve Bank of India (RBI). The recast entails conversion of part of the debt into equity and a reduction in interest rates.
“We expect the debt restructuring exercise to be concluded by the end of financial year 2011. We estimate Rs.450 crore savings in interest costs per annum and expect gearing to decline from 17.1 times in fiscal year 2010 to 1.8 times in fiscal year 2012 as a result of the debt restructuring,” writes Princy Singh, analyst at international brokerage JPMorgan Securities Llc, in a 2 December report.
20/12/10 P.R. Sanjai/Live Mint

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Categories: Kingfisher Dec 2010