Infuse $1-bn equity by Nov 30: SBI to Kingfisher Airlines

Doesn't specify if govt should liquidate airline's assets to recover dues

State Bank of India (SBI) has told Kingfisher Airlines that for the bank to allow corporate debt restructuring, capital of about $1 billion had to be infused into the airline by November 30. However, it didn’t specify whether the government should liquidate the airline’s assets to recover dues if the deadline wasn’t met.

“We don’t put a gun on their head. But the more comes in, the better it is, because the airline business is a very capital-intensive one. I think about $1 billion would be a good starting point,” SBI Chairman Pratip Chaudhuri told reporters on the sidelines of the World Economic Forum.

He said it didn’t matter to SBI where the capital came from—whether it was from promoter Vijay Mallya, his group companies, Indians abroad or foreign airlines. He added the bank was disappointed at the pace of Kingfisher’s capital-raising programme. ‘We made it very clear to the company they have no room for debt and they have to give equity. They have been assuring us they are working hard on it. We would like to see some tangible progress, at least by November 30,” Chaudhuri said.

On Mallya’s reluctance to sell his villas, Chaudhuri said there hadn’t been any discussion on this matter. As these villas were mortgaged to banks, there were legal and pricing issues, he added.

Loans to Kingfisher Airlines have turned non-performing assets in the books of most banks and the airline would have to repay some of its dues to make these standard assets. If corporate debt restructuring is allowed, the airline can repay a small sum to ensure banks resume lending to it after some time.

The 17-bank consortium of lenders to Kingfisher Airlines, led by SBI, is expected to meet soon. It is likely Kingfisher promoter Vijay Mallya would also be invited for the meeting.

Banks expect equity infusion into the airline by a foreign investor could revive the company and help it service its loans.

Lenders have agreed liquidating assets might not be enough to recover their dues fully; they are concerned they might have to take a hit on their books. SBI has exposure of about Rs 1,500 crore to Kingfisher Airlines. IDBI Bank, Bank of India, Bank of Baroda, Punjab National Bank and Oriental Bank of Commerce are some of the other lenders to Kingfisher. Banks have already restructured loans of Rs 6,500 crore to the airline.