Promoters of Kingfisher Airlines might convert Rs 1,500 crore they lent to the airline into equity, chief executive Sanjay Aggarwal told news agency Dow Jones on Wednesday.
The UB Group-run Kingfisher Airlines is seeking fresh credit support to revive the airline following three successive loss-making seasons. Lenders are yet to approve Kingfisher's request for fresh funds, including working capital loans and guarantees, and have sought the promoters bring in equity to recapitalise the airline. The conversion of debt into equity will help fulfil the condition.
The airline expected the debt conversion as well as additional funding from external investors and more loans to help it raise $500-600 million (roughly Rs 2,500-3,000 crore) in six-eight weeks, Aggarwal said. The airline spokesperson did not respond to an SMS query sent by this paper. “We are in talks with several investors in India and overseas,” Aggarwal said. “Apart from that, our founders have 10 billion rupees (Rs 1,000 crore) in loans with the airline and another five billion rupees (Rs 500 crore) in optionally convertible debentures, which can be converted into equity," he said.
Last Tuesday, Kingfisher Airlines allotted equity shares against optionally convertible debentures (OCDs) to save interest costs. In a filing to the Bombay Stock Exchange, the airline said it had issued 79.8 million equity shares to LKP Securities, Redect Consultancy and Star Investments at Rs 25.01 apiece, in lieu of conversion of debentures. Kingfisher has debt of about Rs 6,000 crore, following a restructuring exercise in November 2010. As part of that, promoter loans of Rs 656 crore were converted into compulsorily convertible preference shares. Another Rs 1,137 crore worth inter-corporate deposits were converted into OCDs to reduce the debt burden.
Meanwhile, civil aviation minister Ajit Singh told reporters in Bangalore on Wednesday Kingfisher Airlines could not be closed just because it was making losses and banks were not helping it with funds. "You can't close down a company because they are making losses or banks are not giving them money. As long as passenger safety is not jeopardised, as long as they keep their schedule, why should we close down any industry?" Singh said.