OCD allottees one funding option for short-term support

With time running out for Kingfisher Airlines to raise resources and lenders insisting the promoters infuse at least Rs 400 crore of equity for them to extend more working capital, chairman Vijay Mallya could turn towards Persons Acting in Concert (PAC, with the promoters) for short-term support.

According to senior officials of Mallya’s UB Group, they had allotted earlier this year optionally convertible debentures (OCDs) of Rs 100 each, aggregating to Rs 709 crore to PAC. Senior group officials said tapping this avenue this was one of the quickest ways for Mallya to tide over the immediate crisis.

“FDI (foreign direct investment) in aviation is what we are hoping, but this may take time to fructify. An option is to unlock part-value in UB Group’s flagship spirits firm, United Spirits, and channel resources. Mallya can also infuse funds through UB Holdings, to an extent. With time at a premium for Kingfisher Airlines to raise resources, the promoters have to infuse equity or raise through private equity. There were some discussions with global private equity player TPG. If Mallya has to infuse equity, he can certainly turn towards PAC and it is certainly an option,” senior Group officials added.

In the recent past, while approving plans for a rights issue, the company had altered the terms for optionally convertible debentures.

It had empowered the board of directors to allot unsubscribed portions of the issue to any third party, including OCD holders, to the extent of any part of the redemption proceeds that might remain after subscription to the promoters’ entitlement in the rights issue renounced in favour of the OCD holders.

Senior board sources indicated the PAC consisted of people closely involved with the UB Group for a while.