Lenders led by State Bank of India on Tuesday decided to recall loans given to Vijay Mallya's Kingfisher Airlines and encash shares that are pledged with banks as collateral.
If loans adding up to Rs 7,500 crore and overdue of over Rs 1,000 crore are not repaid by the flamboyant businessman, who often drew comparisons with Virgin'sRichard Branson, lenders will encash other securities, including Mallya's personal guarantee and property. Already, banks are in the process of selling his villa in Goa to recover part of the dues.
Lenders will set up a sub-group that will look at the legal aspects of selling the shares, said a banker. A loan recall is an extreme step when banks are convinced that there is nothing that the promoter can do to revive a sick company. In Mallya's case, the wait has been longer. With no end in sight, 17 banks that have exposure to the airline, once the symbol of luxury in the skies, finally decided to take the call at a meeting on Tuesday.
Bankers were disappointed that there was no proposal by Mallya to bring in substantial capital, which they had earlier hoped would happen after the liquor baron sold a big chunk of his business to UK's Diageo. He said the banks would take legal opinion on how they could deal with the Kingfisher brand which forms a major chunk of the collateral offered by the airline.
Kingfisher — that Mallya launched as a gift for his son on his 18th birthday — has been unable to come up with a feasible plan to restart operations, and its lenders' consortium has decided that it is difficult to sustain the loan in such a situation, SBI deputy managing director Shyamal Acharya said.
While airline executives did not answer calls, Kingfisher CEO Sanjay Agarwal continued to put up a brave face. "Mr (Vijay) Mallya has assured salary payments, and we are currently working on a plan to fly again in the summer schedule," Agarwal was quoted by a TV channel.
But the writing on the wall was clear for KFA which had stopped flying from October last year and did not have any slots in the winter schedule prepared by the Directorate General of Civil Aviation (DGCA). Without a licence, it would be impossible for the airline to be part of the summer schedule that the DGCA is shortly finalizing.
"It is almost the end of the road for Kingfisher. The Airports Authority of India has already decided to give KFA's slots to any airline that wants them. Now, even the private metro airports will do the same," said an aviation official.
(You need to login first to read complete news). New User? Register for FREE!
» Back to Travel News