Banks yet to receive Kingfisher business plan; meeting inconclusive

Banks have been unable to decide on extending further assistance to the debt-ridden Kingfisher Airlines as the company is yet to furnish them with its business plans. The core committee of the five large banks — belonging to the 13-bank consortium that has lent to the airline — that was supposed to meet in Mumbai on Thursday to decide on the company's funding requirements, turned out to be an informal affair, it is learnt.

An official in a lender bank told Business Line that the company has, however, sent in a formal request for fresh limits and the opening of Letters of Credit with aircraft lessors. “Unless we get other financial details, it would not be possible for us to decide on their funding requirements,” he said.

The five banks are State Bank of India, ICICI Bank, IDBI Bank, Bank of Baroda and Punjab National Bank. The 13 banks have a total exposure of about Rs 7,000 crore, of which Rs 4,000 crore is by way of term loans. In a debt restructuring exercise carried out last fiscal, the banks' debt of over Rs 1,300 crore was converted into equity, and banks now own 23.4 per cent stake in the company.

The banker pointed out that even if the interest costs are reduced, it will not be possible for the airline to turn profitable. According to him, if the company brings in fresh equity, banks might even be ready to restructure part of the existing loans into equity, defer term loans or convert term loans into letters of credit.

“Extending the working capital limits would solely depend on future cash flows,” he said. Another banker explained that a business plan would help banks assess the airline's working capital requirements, and the business' ability to generate enough money to repay the debt.

Though banks were aware of the pressure in the aviation sector, “we want to ensure that it is a sustainable debt for the company,” he said. Cash losses cannot be funded by bank loans, he pointed out, adding that equity must be brought in so that debt comes down.

At a press conference on Tuesday, Kingfisher Airlines' officials said its promoters had carried out a Rs 783-crore equity infusion in the company in 2011, of which Rs 150 crore was infused in the past 30 days. The company's working capital requirement was around Rs 700 crore to Rs 800 crore.

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