UB Holdings plans to raise borrowing limit to Rs 5k cr

Senior UB Group official says the company's borrowings would fall substantially in the near term

UB Holdings, owned by UB Group Chairman Vijay Mallya, plans to increase its borrowing limits from Rs 3,500 crore to Rs 5,000 crore.

The company, which is about to close its much-delayed sale of a part of its stake in United Spirits to Diageo, would see an inflow of about Rs 2,400 crore when the transaction is complete. Most of this sum would be used to repay its Rs 3,500-crore debt.

After the deal, UB Holdings might address a part of Kingfisher Airlines’ dues of Rs 8,000 crore through the increased borrowing limit.

Corporate guarantees
A senior UB Group official said while the company planned to prepare itself for increased borrowings, borrowings would fall substantially in the near term.

This would have a positive effect on the corporate guarantees UB Holdings had offered.

Vijay Mallya, along with his various companies, holds about half the stake in UB Holdings. Of that stake, 15.5 per cent has been pledged.

UB Holdings, along with its subsidiaries, has significant exposure on various counts to Kingfisher Airlines, including about Rs 2,100 crore of equity and loans of about Rs 2,360 crore. Due to this exposure, the company has been facing heat from lenders, as well as lessors of aircraft.

Through the past year, the lenders have been active in liquidating certain investments pledged with them.

Even as the protracted process of liquidating further assets is set to start next month, UB Holdings has initiated a legal process to stop various steps by lenders.

It has filed a suit, seeking the pledges be declared void. It is understood UB Holdings is taking a stand based on ‘lender’s liability’ — the process through which a lender recovers should be without prejudice.

It argued lenders hadn’t followed this principle and, therefore, it was moving court to claim about Rs 4,500 crore as damages from lenders, aircraft lessors and other vendors.

On Wednesday, the UB Holdings stock closed at Rs 22.45 on the National Stock Exchange, a rise of 0.2 per cent.