Debt-laden Kingfisher Airlines, owned by Bangalore-based UB Group, on Friday announced that the company board has approved mobilisation of upto Rs 2,000 crore through a rights issue. The company, however, did not reveal when it would hit the markets with the issue.
Ever since Kingfisher acquired low-cost carrier Deccan Airlines in late 2007, the airline has been trying to raise equity through various instruments – rights, global depository receipts and through private equity, but had to resort to raise debt.
Industry analysts tracking the sector, however, said they doubt if Kingfisher’s rights issue will be fully subscribed. UB Holdings, the principal holding company representing the promoter’s interest, will have to figure out ways to pump in equity in that scenario.
In addition to approving the rights issue, the Kingfisher board has enabled a resolution to allot unsubscribed portion of the rights issue to a third party, including optionally convertible debenture holders. The company, as part of its debt recast package in late 2010, had allotted OCDs of Rs 100 each, aggregating a little over Rs 709 crore to entities who had confirmed their intention to act as ‘persons acting in concert’ with the promoters for the purpose of that issue.
According investment bankers close to the company, Kingfisher Airlines will have to raise at least Rs 900 crore before the end of the current fiscal. By end of FY11, the company’s interest outflow was Rs 1,300 crore and with the recent debt recast kicking in from early 2012, the blended interest rate is around 11 per cent. On a debt of Rs 6,000 crore, the company will have to pay Rs 660 crore by the end of FY12.
Kingfisher Airlines has an equity base of a little over 497 million shares, which was recently expanded based on the debt recast approved in December 2010. As part of that debt recast, Kingfisher got a special one-time nod from the Reserve Bank of India to restructure its debt by converting a part of its Rs 7,000-crore debt into equity along with a moratorium on principal for two years, lowered interest rates and a ballooning repayment option over the next few years to settle its highly leveraged debt.
As part of this debt restructuring, a consortium of 13 lenders, led by State Bank of India got little over 23 per cent stake to get their debt converted into equity.
“It is unlikely that these shareholders will invest further and may see their holding come down,” said an industry analyst.
UB Group Chairman Vijay Mallya through various investment vehicles own 58.61 per cent in the company which reported a net loss of Rs 1,013 crore at the end of last fiscal. Mallya has pledged a little more than 90 per cent of his holding to a clutch of banks to raise debt, which is currently at Rs 6,000 crore. The market cap of the company on Friday was Rs 1,127 crore.
The company is hoping that with improved efficiencies, increased load factors which it is witnessing, and equity infusion, it hopes to meet the commitment of interest payouts. However, during the first quarter of FY12, it posted higher Y-o-Y losses at Rs 263.54 crore from Rs 187.34 crore in the year-ago period owing to high fuel costs. Revenues moved up by around 19 per cent to Rs 1881.64 crore.