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Indian lenders may sell Kingfisher assets to recover debts

Publication Date : 06-07-2012


A State Bank of India-led consortium of lenders may shortly start liquidating the pledged assets of Kingfisher Airlines if the private carrier does not come up with effective measures to improve its finances and flying operations within a fortnight.

To start debt recovery, the lenders are likely to put Kingfisher House at Vile Parle in west Mumbai and its chairman Vijay Mallya's Kingfisher Villa in Goa on sale which, according to their estimate, should fetch 135 crore rupees. (One crore is equivalent to 10,000,000.)

Lenders to the airline have appointed HDFC Securities to do a valuation of the two pledged properties of the crippled carrier as part of their plan to partially recover 7,500 crore rupees loan.

Although a formal decision is yet to be taken by the lenders, they have conveyed it in clear terms to the KFA functionaries here today at a meeting specially called to discuss the debt recovery procedure.

Kingfisher Airlines, however, said: "The meeting was scheduled as an update meeting and there was no discussion on commencement of recovery proceedings."

The total debts of KFA, including outstandings to the Income Tax Department and Airports Authority of India, are more than 7,500 crore rupees. The lenders at today's meeting conveyed their serious concern to the KFA management about mounting debts and lack of proper response. The bankers and KFA have agreed to meet again next month.

A few days ago, the top private lender ICICI Bank in a smooth deal claimed that it had recovered its entire debt exposure of 430 crore rupees by selling/transferring it to a debt fund managed by Kolkata's Srei Infrastructure Finance. It was a clear message to other members of the consortium to move fast and salvage whatever they could.

KFA, however, issued a statement clarifying that no liquidation of assets proposal was discussed at today's meeting. It claimed "there was no discussion on commencement of recovery proceedings.

Kingfisher House has been lying vacant after the staff moved to a new premises (The Qube) elsewhere in Mumbai and at that time itself, on our own accord, we approached the banks with a proposal to liquidate this unutilised asset. At today's meeting we raised the issue of this pending approval."

Admitting in a roundabout way that it did agree to liquidation, the KFA management further claimed that the lenders could not decide whether or not to invoke the guarantee. But the bankers were certainly worried as they realised KFA was non-committal on their insistence to infuse fresh funds into the financially ailing airline.

The KFA management has pledged various assets to its lenders to raise cash and capital since its launch in 2005 although the Mallya-controlled airline failed to earn profit--quarterly or yearly--even once in seven years. The total value of assets pledged, according to industry sources, is about 5,240 crore rupees . The company has hypothecated its "Kingfisher" brand to lender banks which according to valuation done by Grant Thornton is worth 4,100 crore rupees.

Meanwhile, LKP Merchant Financing today sold 78.51 lakh shares of debt-laden Kingfisher Airlines for 9.57 crore rupees in an open market transaction. However, buyers of the shares could not be ascertained. (One lakh is equivalent to 100,000.)


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