Kingfisher may raise Rs 300 cr debt soon

Initiates steps for Rs 440-cr GDR.

Kingfisher Airlines, owned by Vijay Mallya’s liquor-to-airlines UB Group, plans to raise Rs 300 crore of debt in the near future. This will increase its current debt book to around Rs 7,800 crore — a leverage of almost 25 times.

The debt will be from a consortium of banks led by India’s largest lender State Bank of India to help the airline in its operational expenditure. The aviation industry is going through a bad patch due to the slowdown, higher operational expenditure and rising aviation turbine fuel prices.

Major players in the sector —Jet Airways, Kingfisher Airlines and Air India — have a combined debt book of Rs 50,000 crore according to the Centre for Asia Pacific Aviation and are seeking help from the government to restructure their books. Till that happens, many players are looking to raise funds to meet their rising operational expenditure needs.

The company also plans to raise funds through issuance of global depository receipts (GDRs). “We are planning to raise Rs 440 crore though the GDR route in the next few weeks and have started the process with the appointment of Linklatera, a London-based legal firm,” said A K Ravi Nedungadi, president and chief financial officer of UB Group. It is expected that Kingfisher Airlines will look at the Luxemburg Exchange to list the GDR. “We have been meeting global investors across Europe and Asia. There is palpable appetite for aviation stocks in the global markets,” said Nedungadi.

“Kingfisher has to raise equity as its networth has eroded due to the recent losses the airline has been posting. Post the GDR, and if there is appetite for aviation stock in the Indian market, the company may also look at a follow-on public issue,” said a senior official of the UB Group.

Kingfisher Airlines, at a recent presentation to investors, had said the company was looking at reducing debt and had appointed the US-based consulting firm Seabury, to draw up a five-year business plan.

The presentation also said the company was looking at rationalising distribution costs, reduction in expat pilots, renewal of operating leases at 20 per cent discount and infusing additional operational efficiencies.

Kingfisher Airlines posted a loss of Rs 419.96 crore in the third quarter ending December 2009, a 1.5 per cent rise over the corresponding period last year.