Move spurred by airline’s falling brand value
The 17-bank consortium that funded ailing Kingfisher Airlines(KFA) wants other Kingfisher brands to be pledged as collateral.
Currently, the Kingfisher Airlines is the only brand that has been charged with the banks. Now, the banks are looking to bring other Kingfisher brands as charge under their fold, including the market leading Kingfisher beer brand, owned by KFA promoter Vijay Mallya.
The proposal to extend charge to other brands in the group comes in the wake of erosion in the security value on banks’ existing exposure to KFA. This was decided at a meeting of the bank consortium held in Mumbai earlier this month, sources close to the developments said.
The other Kingfisher brands that are sought to be brought under charge could be those relating to mineral water and music CDs.
As against a net exposure of about Rs 6,339 crore, the total value of pooled security available with the banks was Rs 5,213 crore, it is learnt. This translates into security coverage of about 82 per cent.
Kingfisher Airlines brand was the only intangible and all other assets were physical assets on which charge was created. An international consulting firm had in April 2010 valued the Kingfisher Airlines brand at Rs 4,111 crore.
As much as 83 per cent of the total value of pooled security came from an intangible asset. Tangible assets like the Kingfisher House in Mumbai accounted for only 17 per cent.
The continuing losses incurred by the private airline has eroded the security value, especially in the recent years, compelling the consortium to seek extension of charge to other Kingfisher brands in the group, it is learnt.
Meanwhile, bankers have opposed a proposal of the private carrier to substitute the charge of promoters’ villa in Goa with another asset.
At the meeting, bankers made it clear that substitution would not be encouraged, sources said.
Kingfisher House in Mumbai and the promoters’ villa in Goa are considered as non-core assets. The bank consortium has initiated the process of valuing them and finding a buyer for them. SBI, which is the consortium leader, is doing the valuation on its own.
The future course of action by banks in the KFA case would largely depend on how soon the promoter is able to bring capital into the airline.
KFA Chairman Vijay Mallya has been asked to make a presentation to the banks before this month-end.
SBI Chairman Pratip Chaudhuri has already made it clear that banks would not go by ‘promises or projections’ alone, but would like to see action in the form of capital infusion.