State-run banks want to wrest control of Kingfisher Airlines' cash flows

Mumbai: Government-owned banks have sought to wrest control of part of the cash flows of Kingfisher Airlines that is currently controlled by three of their private sector counterparts.
The bone of contention is money received by the loss-making airline from tickets bought through credit cards, said senior bank officials.
The officials, who spoke on condition of anonymity because the matter was still under discussion, said government run banks had argued that they had a stronger claim to credit card receivables as their exposure to the Vijay Mallyaowned airline was more than that of private banks. But the proposal has been rejected by the three private sector banks - ICICI, Axis Bank and IndusInd - whose loan agreements with Kingfisher stipulate that proceeds of tickets booked through credit cards go to them.
At a recent meeting, officials of public sector banks proposed the opening of a dedicated account, known as an escrow, at the State Bank of India (SBI) where the airline would deposit the proceeds of tickets bought through credit cards. The airline would have to reach an agreement with the settlement agencies such as Visa and MasterCard - to operationalise the escrow account, essentially overturning the loan contracts between the private sector banks and Kingfisher Airlines.
State Bank of India has lent about Rs 1,400 crore to Kingfisher Airlines as against Rs 450 crore by ICICI Bank and Rs 50 crore of Axis Bank. ICICI Bank did not respond to the email enquiry.
07/12/11 Sangita Mehta/Economic Times

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Categories: Kingfisher Dec 2011