‘Lenders with high exposure begin offloading their stocks’

With the banks ready to recall loans given to Kingfisher Airlines, a few of the UB Group companies will have to bear the brunt of the decision as their shares have been pledged with the lenders, as corporate guarantees.

The total debt according to the last quarter was as high as Rs 8,034.5 crore on the books of the airline.

“Some of the lenders with high exposure to the airline are already offloading their stocks in the market because of the latest development,” Kishor Ostwal of CNI Research told Business Line. This was reflected in today’s share prices of most of the listed UB Group companies which went on a downward spiral.

While United Breweries’ share price was down 9.26 per cent to close at Rs 642.5, that of United Spirits closed the day at Rs 1,862.45, a drop of 4.84 per cent. Kingfisher Airlines share price dropped nearly 5 per cent to Rs 10.58 and UB Holdings’ share was down 9.94 per cent to Rs 70.25.

Another analyst said with the airline’s net completely eroded, it was ready to be referred to the BIFR (Board for Industrial and Financial Reconstruction). In case it happens, the airline’s capital base will either be restructured or if every attempt to revive the entity fails, then it will be merged with a healthy company.

This is an option which hasn’t come up for discussion during the multitude of talks both the airline’s management and the lenders have had with each other. SBI has already said that the total worth of the collateral pledged with the consortium of lenders is about Rs 6,500 crore and hence it could take the legal route to recover them.

The exposure by UB Holdings, the holding company of the UB Group, to Kingfisher Airlines is: Investment in equity Rs 2,109.31 crore; guarantees to banks: Rs 6,631.35 crore; guarantees to aircraft lessors and others: Rs 2,135.60 crore; advances given: Rs 2,271.64 crore; and interest and commission receivables: Rs 390.22 crore. Part of these guarantees, the auditors say, has already been invoked by the bankers and lessors.

The auditors say that no provision has been made in the accounts of UB Holdings for the probable loss that may arise on account of the financial exposure. In case the lenders start recovery proceedings, the valuation of UB Holdings itself might take a beating, according to another analyst.

However, proceedings by lenders will not be that easy. “Only after paying the salaries and taxes, the banks can lay claim to their share,” Ostwal said.


(This article was published on February 13, 2013)
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