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Kingfisher Airlines is back with a debt restructuring plea but banks are unwilling to take a fresh haircut this time citing the company's weak finances and the loss they incurred on converting a part of their loans into equity. In addition, they fear that a fresh recast will force them to treat the loans as a non-performing asset (NPA), in line with the Reserve Bank of India norms.
Further, they pointed out that Kingfisher was yet to fulfill a part of its commitment which included filing of the assignment agreement for the brand. This agreement with the Registrar of Trademarks would transfer the ownership of the brand to the lenders which will help banks trigger the default clause.
While Kingfisher has not formally approached lenders with a proposal, bankers said the private airline which has been incurring losses, is looking to raise additional short-term loans, issue lines of credit in lieu of cash deposits lying interest free with lessors, substituting high-cost rupee debt with low-cost foreign currency loans and also raise Rs 2,000 crore via a rights issue.
Lenders said the biggest stumbling block will be RBI since loans have been restructured more than once and the regulator will now demand downgrading of the asset to NPA category if banks provide fresh succour. In the absence of compliance with earlier stipulated conditions, the task is going to get tougher, they added. Further, they pointed to the loss incurred on conversion of debt into equity.
Against the prevailing market price of Rs 40 a share, on March 31 this year, there was preferential allotment to SBI and ICICI Bank due to conversion of compulsorily convertible preference shares into equity shares at a price of Rs 64.48 each, which represented a 60% premium over the prevailing market price. Since the end of March, Kingfisher's share price has declined 40% and closed at Rs 24.10 on Tuesday. "Given the impaired financial position and low security cover, taking additional exposure in the airline is not advisable," said a bank chief. "It is going to be very difficult to convince my board once again," added the head of another bank.
Kingfisher Airlines denied on its part that it was going for another debt restructuring but said it had sought lenders' help to substitute high-cost rupee borrowings with low-cost foreign current debt.
It has also asked banks to "appraise working capital requirements in the usual course, to account for changes in international prices of fuel and the change in rupee-dollar parity," Ravi Nedungadi, President and group Chief Financial Officer said in a statement.
"The banks are in active consideration of these requests and there is absolutely no question of another debt recast," he added.
TOI / Reuters
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