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The debt restructuring plan, worked out by a consortium of banks, will give beleaguered Kingfisher Airlines a relief of Rs 1,644 crore. Conversion of debt into equity, additional bank loans on cards.
The debt of the country's second largest carrier stands at Rs 7,651 crore, which after restructuring will come down to Rs 6,007 crore. Part conversion of debt into equity and additional disbursement of funds by banks are part of the restructuring plan.
The RBI had cleared airlines' debt restructuring proposal in September 2010 as the airline industry was reeling under the impact of economic recession and falling passenger traffic. This restructuring will help the companies reduce their interest burden and curtail losses.
Restructuring plan
As part of the restructuring, Kingfisher Airlines' Rs 4,263 crore of term loans has been converted into compulsorily convertible preference shares (CCPS) and cumulative redeemable preference shares (CRPS). Of this, Rs 750 crore will be converted to CCPS and Rs 553 crore to CRPS.
CCPS will be converted into equity shares either at the time of “any GDR (Global Depository Receipts) issue or by March 31, 2011” – whichever is earlier, or at a “mutually agreed date, which is not later than 18 months” from the date of allotment of CCPS, according to an investor presentation.
The conversion price of CCPS will be determined as per SEBI regulations, it said.
The term loans will have a maturity of nine years with two year moratorium on principal payment.
The recast has also allowed the airline to convert part of its Rs 590-crore working capital into working capital term loan (WCTL). After the conversion, the WCTL is crystallised at Rs 297 crore.
In addition, the existing lenders have agreed to sanction additional rupee term loan (RTL) and non fund based limits amounting to Rs 1,212 crore. Of this, Rs 768 crore is rupee term loan and Rs 444 crore is non-fund based limit. Parts of these amounts have already been disbursed.
“Additional rupee term loan will be of five years tenor with a two-year moratorium on principal repayments,” said the presentation.
Interest relief
The banks have also agreed to a reduction in the interest rate on term and working capital loans to about 11.1 per cent from the current average of 14 per cent a year. The interest rate reduction in the case of term loan is effective from July 1, 2010 while for working capital loan from October 1, 2010.
Also, interest payment for the period from July 2010 to March 2011 funded by the banks and converted into a Funded Interest Term Loan (FITL) amounts to Rs 350 crore. Out of this, Rs 101 crore has been converted into CCPS.
Promoter loans
The restructuring has also led to conversion of promoter loans amounting to Rs 648 crore into CCPS of Rs 10 each at a coupon rate of 6 per cent. Promoter loan is Rs 656 crore. The CCPS will be converted into equity shares within 18 months from the date of allotment of the CCPS at conversion price as per SEBI norms.
Of the Rs 1,137 crore of inter-corporate deposit, Rs 709 crore will be converted into optionally convertible debentures (OCDs).
The airline said that the OCD holders have agreed to convert the debentures into equity shares either at the time of GDR or issuance of any other equity-based securities as long as it does not trigger an open offer as per SEBI's guidelines.
Indian airline operators suffered cumulative losses of $400 million in 2010, and their debt adds up to $13 billion.
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