Lenders to the cash-strapped Kingfisher Airlines Ltd have asked its promoters to sell some of their non-core assets, including Kingfisher House in Mumbai and a Goa villa belonging to the carrier’s Chairman, Vijay Mallya, for repayment of dues.
At a meeting held on Thursday to review the airline’s financial position, the group of bankers led by State Bank of India (SBI) asked the promoters to take urgent follow-up action, but did not initiate any debt recovery proceedings against the airline.
A Kingfisher statement said there was no discussion on commencement of debt recovery proceedings. “King-fisher House has been lying vacant after the staff moved to our new offices at The Qube in Mumbai, and at that time itself, on our own accord, we approached the banks with a proposal to liquidate this unutilised asset. At on Thursday’s meeting, we raised the issue of this pending approval,” the statement said.
The airline needs lenders’ approval, as the property has been pledged as security against loans.
Kingfisher has debts worth Rs 7,000 crore and is facing an acute cash crunch. Kingfisher reported its worst-ever quarterly loss of Rs 1,151 crore in the March quarter. The fourth quarter losses trebled from Rs 355.6 crore reported in the March 2011 quarter. The troubled air carrier attributed the widening of loss to a steep rise in fuel prices and sharp depreciation of the rupee.
“The airline has told us about selling non-core assets, including the airline’s office property in Mumbai. It is showing cooperation (for repayment),” a senior SBI officer said on condition of anonymity. “It’s better to see the company cooperating with lenders for repayment, rather than we initiating legal options for recovery. Thursday’s meeting was a regular consortium meeting and similar meetings were held before this financial year,’’ the official added.
Another public sector bank official, who also did not want to be named, said: “Although Kingfisher has agreed to sell its office property in Mumbai, we have to see what is the charge on it and the timeframe for process (of sale).”
Added a property market source: “Kingfisher House is a one-storey building and has two basements. According to the airline’s calculations, the entire area measures up to 25,000 sq ft. At present, commercial property prices in the area range from Rs 12,000-13,000 per sq ft, but the airline has been seeking a higher rate for it.”
There is an expectation mismatch regarding the quoted price. “Property buyers will not pay something like Rs 15,000 /per sq ft for the basement. There are also certain pending dues with regard to property and deal may not happen soon. It’s a good location, but it will be attractive if the title is clear and there are no pending dues.’’
While lenders have been contemplating another round of restructuring, it can happen only if all lenders declare Kingfisher’s debts as non-performing assets (NPA), which is not the case at present. Banks would have to revalidate the viability of airline afresh on the basis of new financial information.
Many lenders including SBI, Bank of India, Central Bank of India treated Kingfisher airline accounts as NPAs in 2011-12. The company defaulted on payments to some lenders. However, banks like Indian Overseas Bank continue to treat them as standard assets, as the company is making interest payments.
Banks have already restructured loans to Kingfisher in 2010-11. Under the deal, promoter Mallya was to infuse fresh equity into the company as part of a debt recast package.
