Debt-crippled Kingfisher Airlines said on Tuesday it had allotted equity shares against optionally convertible debentures (OCDs), a development that would help the country’s third-biggest carrier by market share save interest outflow on such instruments.
Kingfisher said in a filing to the Bombay Stock Exchange (BSE) that it had issued 79.8 million equity shares to LKP Securities, Redect Consultancy and Star Investments at Rs 25.01 apiece, in lieu of conversion of debentures. The troubled carrier had allotted 70 million OCDs at an interest rate of eight per cent to the three entities in January last year. The conversion of OCDs into equity shares will help Kingfisher reduce its debt burden, as it will save on the eight per cent interest cost.
“Post-allotment, the paid-up equity share capital of the company stands increased to Rs 577 crore, from Rs 497 crore,” the company said in the filing. According to the terms of the OCD issue, the holder has the option to convert the instruments into equity shares within 18 months from the date of issue. The 18 months end on July 2, 2012.
The move came close on the heels of the finance ministry making it clear banks should not lend to the cash-strapped airline. “We have made it clear there should be minimum exposure to companies at a risk. As the Kingfisher account is already a non-performing asset, it is not advisable to increase bad loans further,” a senior finance ministry official said. Though a final decision would be taken by banks’ boards independently, any further support to Kingfisher was unlikely in the current circumstances, he said.
Meanwhile, the Directorate General of Civil Aviation (DGCA) asked Kingfisher to submit a ‘realistic’ flight schedule in 24 hours, which can be implemented properly.
“Kingfisher was operating with a fleet of 64 aircraft in the beginning of the winter schedule that started on November 1, 2011, which has come down to 28. So, we have asked it to prepare a realistic schedule of operating about 175 flights a day and submit it to us in a day,” said DGCA head Bharat Bhushan after a two-hour meeting with the airline’s chief executive, Sanjay Agarwal, and executive vice-president, Hitesh Patel.
The airline that operated 360 flights a day till the beginning of November is operating less than 175 flights a day. This is the third time in about two months when the airline has pulled out flights without informing the aviation regulator. It is mandatory for an airline to inform the regulator under Civil Aviation Requirement.
Kingfisher said yesterday flights had been cancelled because its accounts had been frozen by the Income Tax department. The airline owes Rs 130 crore to the I-T department and Rs 43 crore in service tax to the government.
It reported a loss of Rs 1,027.4 crore for 2010-11 and posted losses of Rs 1,175 crore for the first three quarters of this financial year, with accumulated losses of Rs 6,000 crore. Its debt burden is at over Rs 7,000 crore.
After the meeting, Agarwal said the airline would give its answers to the DGCA in 24 hours. “We have sufficient pilots with us and cancelled flights will be back in service in five to six days,” Agarwal said.
DGCA is also preparing a report on Kingfisher, which will be submitted to the civil aviation ministry on Tuesday itself. According to rules, the government can cancel the airline’s licence. “The priority is not to punish the airline because any such action will give rise to immediate difficulties for passengers. However, that doesn’t close any option for us,” Bhushan said.
Kingfisher shares closed 0.75 per cent higher at Rs 26.80 on the BSE, after a sharp plunge of 20 per cent earlier in the day.
Vijay Mallya, the flamboyant liquor baron who owns a majority stake in the carrier, said on Tuesday he was determined to keep the airline flying. “I am absolutely committed to keeping the airline going unless some government agency wishes to ground it,” Mallya told reporters.