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Kingfisher Airlines, which had asked SBI Caps to assess its business and recapitalisation needs, will submit a “fully documented” proposal to the State Bank of India, the lead bank of the 13-member consortium before the end of the week.
Apart from the proposal, the airline has also given a commitment to the consortium that it would pay up at least two months' instalment/interest to the banks by December 19, an official of one of the lender-banks told Business Line . According to him, all its future requirements would now have to be supported by documents.
Working capital
The official said that the airline has sought a short-term working capital funding of about Rs 500 crore from the banks. However, during a press conference last month, Mr Vijay Mallya, Chairman, UB Group, had indicated working capital requirements of Rs 700-800 crore.
“But until the proposal is received, no bank under the consortium will take any additional exposure in the company — short-term or long-term,” pointed out the official.
By committing to pay a part of the instalment/interest by early next week, the company could possibly avert its account becoming a non-performing asset (NPA). The beleaguered airline had failed to pay its interest dues to its lenders by November 30, when the 90-day limit to pay at least the interest dues ended. The failure to pay the dues rendered the account a potential NPA for the banks.
The 13-bank consortium has a total exposure of nearly around Rs 7,000 crore to Kingfisher Airlines.
During the last fiscal, a portion of the debt was converted into equity shares at a price of Rs 64.48 a share (as of March 31, 2011) compared with the prevailing market price of Rs 39.90 a share as part of a debt restructuring exercise.
Consequently, the consortium of banks holds a 23.4 per cent stake in the company. Over Rs 4,000 crore of the banks' total exposure are in the form of term loans. When part of the debt was converted into equity, the total investment of the banks in the airline's equity was slightly over Rs 750 crore. Since then, its value has eroded to less than half.
Lender-banks include ICICI Bank, Axis Bank, IDBI Bank, Punjab National Bank, Bank of Baroda, Bank of India, UCO Bank, Oriental Bank of Commerce and State Bank of Mysore.
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