Kingfisher lenders say recovery last option

Lenders to Kingfisher Airlines, whose combined exposure of nearly Rs 7,500 crore is at risk, have said they will go in for recovery measures only as the last resort and expressed hope that its promoters will be able to find an investor and resume operations.

Aviation regulator DGCA yesterday suspended the licence of the financially-troubled airline.

"At best, we will be able to recover just 10-15 per cent of our overall exposure if we were to monetise the pledged properties. So initiation of recovery measures will be our last recourse," a senior official of a city-based public sector lender told PTI.
This bank has around Rs 500 crore stressed exposure.

When contacted, SBI, which leads the consortium of 17 banks and has an exposure of over Rs 1,500 crore, said the airline was grounded for the past three weeks anyway and thus there is nothing new with the DGCA ordering suspension of its licence.

"Though there is nothing new following the DGCA suspension, we are concerned as we have no control on these developments," S Vishwanathan, managing director, mid- corporates at SBI said.

"We were prepared for all these. The last thing we bankers want is a complete shut down of the airline as we want it to resume operations and repay our money," he added.

Another lender said the DGCA action of suspending flying licence of the airline just formalises the shut down which it has been doing since the past three weeks and, therefore, it does not make any material impact.

The comments come a day after aviation regulator DGCA suspended the licence of Bangalore-based Kingfisher Airlines when the management failed to present a credible revival plan, including arrangements for clearing the seven months of salary dues on which the employees have been striking work since September 29.

In July end, the lenders had appointed HDFC Securities to value two properties - the Kingfisher villa in Goa and the KF house in Mumbai - which are pledged with them as collaterals.

According to market sources, these two properties at best fetch Rs 180 crore.
Apart from these, the promoters have also pledged brand Kingfisher for a consideration of Rs 4,000 crore, besides most of the shares of group companies as collaterals.

The SBI official also stated that the suspended Kingfisher licence can be restored when the airline gets a new investor or it resumes operations on its own.

"There are three options for the airline and the banks. First the airline restarts working and then starts repaying us; second, a new investor comes and we finance him or he repays our debt and runs it on his own; and finally, the airline is completely shut down, in which case we will have to look at recovery measures," Vishwanathan said.

Shyam Srinivasan, managing director and chief executive of Federal Bank, which has an exposure of Rs 80 crore (an encashed bank guarantee and not a loan) also said licence suspension does not complicate the matter further for banks.

"We are persuading the airline to bring some fresh equity and resume operations. Towards this we can even look at recasting his existing loan as a fresh lifeline," the PSU banker said.

When asked could the banks recover their dues from taking over and monetising the assets of other group companies, he said "it depends on the relationship of the airline with other group companies. But that is a legal step. Recovery is the last resort we want to begin."

The banks had already restructured Kingfisher loans worth Rs 6,500 crore in November 2010.

Liquor baron Vijay Mallya-owned carrier has been saddled with a loss of Rs 8,000 crore and a debt burden of another over Rs 7,500 crore, a large part of which it has not serviced since January. The airline currently has only 10 operational aircraft, compared to 66 a year ago.