Kingfisher Airlines gets nod to recast debt

Kingfisher Airlines' debt restructuring package has received an in-principle nod from bankers. The package will be implemented within 120 days of receiving the Reserve Bank of India's (RBI) nod.

Kingfisher, the second largest carrier in terms of market share, has debt of around Rs 6,000 crore across 12 lenders such as the State Bank of India, Bank of India and Vijaya Bank, among others.

As a cautionary measure, banks expect the RBI to stipulate the banks to provide a higher provisioning amount for Kingfisher, to classify it as a standard account. Currently, some portions of Kingfisher's loans are classified as Non Perfoming Assets (NPAs) by some of its lenders. Bank of India has classified Rs 375 crore as NPA; Vijaya Bank has so classified Rs 25 crore.

However, the package also includes a financial guarantee from UB Holdings, the parent company of Kingfisher.

"The details of the restructuring package are still under discussion. However, it is necessary to  be done before Kingfisher tries to raise money through equity," said a source from the banking industry. Kingfisher is likely to raise around Rs 745 crore through the equity route in the next six months.

Kingfisher also recently announced long-term fund raising plans. Its board approved Rs 5,000 crore of fund raising, through issuance of equity shares, preference shares or global depository receipts (GDRs). Of the amount, the company will be raising up to $250 million (Rs 1,100 crore) through GDRs and another Rs 500 crore through a domestic offering.

"The funding is expected to be completed within the next three to four months," said the company in a statement.

Lenders are known to have asked for advance repayment of loans from Kingfisher, if the company performs better than the timelines specified in the package. "Banks will also possibly lay down conditions that will stipulate how the money the carrier expects to be raising should be spent. However, this will not be done at the cost of the development of the company and its growth," said a banker close to the development.

A 400 crore bank guarantee is also likely to be part of the package for Hindustan Petroleum Corporation, primary supplier of aviation turbine fuel to the carrier.

Kingfisher losses in the April-June quarter was Rs 187.3 crore, 21  per cent less than in the same period last year, owing to an increase in loads and yields and several cost cuts.