Kingfisher lenders convert part-dues to equity way clear for GDR issue

A consortium of 13 banks led by State Bank of India, which have lent to UB Group’s Kingfisher Airlines, have converted a part of their loans to equity, at Rs 64.48 per share.

This is a 62 per cent premium over today’s market price of Rs 39.80 per share on the National Stock Exchange.

Kingfisher said the price was arrived in accordance with the pricing guidelines prescribed under the Securities and Exchange Board of India, which is the average of the past six months’ price, 30 days prior to the relevant conversion date.

It said the allotment was of close to 232 million shares of Rs 10 each to the banks and a couple of promoter group companies, pursuant to conversion of compulsorily convertible preference shares at Rs 64.48 per equity share.

With this conversion, the lenders together hold around 12 per cent, while the promoters, who currently hold a little over 66 per cent, will dilute stake marginally. Further to the allotment, the paid-up equity capital has increased to Rs 497 crore from Rs 265 crore.

This move by the lenders follows a decision taken during end-November 2010 on a debt recast package, effected after a one-time relaxation in restructuring guidelines sanctioned by the Reserve Bank of India.

Under the package, the lenders would convert debt of up to Rs 1,355 crore into share capital, while the promoters were to convert their debt of up to Rs 648 crore into share capital. In addition, the lenders had agreed to reschedule repayment of the remaining debt over nine years, with a moratorium of two years, and would also work on reduction in interest rates. The lenders have also sanctioned an additional debt of Rs 500 crore as part of the package.

The airline is the second largest in India in number of travellers. It has been facing severe strain, as its debt is close to Rs 7,000 crore, even as its net worth had eroded. It has been managing to come forth with good operating numbers but has been deep in debt servicing and the delay in equity infusion was taking a toll on its balance sheet.

With this debt restructure taking effect, the company is hoping to go ahead for a long-pending global depository receipts issue. It has planned to raise around $250 million (Rs 1,115 crore) by listing on the Luxembourg Stock Exchange.