Kingfisher Airlines may roll over Rs 800-crore debt

Kingfisher Airlines is looking to roll over close to Rs 800 crore of its short-term debt, even as it finalises the paperwork to borrow another Rs 1,500 crore from a few Indian public sector banks.

The airline, owned by Indian billionaire Vijay Mallya's liquor-to-airlines UB Group, is understood to be finalising the details of the rollover of debt that is due this fiscal.

According to data from Kingfisher Airlines, the company has short-term debt of around Rs 2,500 crore and a third of that is due for repayment this fiscal.

UB Group officials say they are confident of banks approving a rollover. “It is highly likely that we will get the nod for the rollover as banks are also eager not to categorise these loans as non-performing assets. UB Group also has had a long history of taking on debt and we have been effective in repayment. Besides, the airline industry is going through rough weather and financial institutions are recognising that we will be able to pay them back at the earliest,” a senior UB Group official said.

Kingfisher Airlines has a cumulative debt of close to Rs 6,000 crore and is leveraged around 13 times. It recently borrowed around Rs 500 crore from State Bank of India. The airline is also expected to take on an additional Rs 1,500 crore debt, which will raise the leverage to around 16.5 times. Industry sources estimated that Mallya had offered his personal guarantee to raise the additional Rs 2,000 crore of debt.

Company sources, however, indicated that this kind of heavy leverage was common in the aviation sector, with global airlines leveraging as much as 20 times. “It is not about leverage for now, it is about whether you have the wherewithal to ride out the trough and be ready for growth,” a senior official of UB Group added.

According to data from Kingfisher Airlines, corporate loans of around Rs 2,500 crore are mainly secured against cash flows from the airline operations and is backed by a corporate guarantee from UB Holdings, Mallya’s principal holding company, which controls around 67 per cent of Kingfisher Airlines.

Mallya has been lobbying the Indian government to allow foreign direct investment into the Indian civil aviation sector and is also understood to have initiated discussions with global airline majors.