Lenders to the cash-strapped Kingfisher Airlines have been left in the lurch with solutions for a turnaround for the airline nowhere in sight. But one of the lenders, Srei Infrastructure, seems to be in a better position than the other lenders, said an analyst.
Kingfisher Airlines has a debt of about Rs 7,000 crore. Seventeen banks have given loan to KFA which include banks like State Bank of India, Bank of India, Bank of Baroda and Punjab National Bank.
Earlier this year, Srei Venture Capital a debt fund of Srei Infrastructure had bought out the entire exposure of ICICI Bank, worth Rs 430 crore, in the ailing Kingfisher Airlines.
The recent deadlock between the management and employees over salaries has made lenders to release some funds from bank accounts that were earlier frozen by the Income Tax Department. But talks of restructuring the debt by banks have failed so far.
The difference between Srei and banks is that Srei has collateral against a part of the loan it bought from ICICI.
“The debt that Srei took over is not unsecured. Normally all NBFCs have stringent rules compared to banks when it comes to giving loans. NBFCs take a good amount of security to the loan disbursed. It is generally 2 to 2.5 times. Also this was a secondary deal, ideally Srei would have happened at a certain discount,” said Amit Baheti, Head of Research, AUM Capital Market.
According to reports these collateral includes personal guarantee of Vijay Mallya and some shareholding in United Spirits. According to a senior public sector bank executive, “Our exposure (loan amount) is so huge that sale of assets (collateral) are not adequate to meet the obligations.” Loans to the airline are already classified as non-performing assets on the books of most banks.
Experts also point out that Srei Infrastructure had not bought the loan from ICICI, it was done by a subsidiary fund of the company, hence it does not have any direct exposure. “This fund has capital investment from Srei and other third party lenders. To that extent we need to see how much is Srei’s investment in the fund. The management of the company had told us that the collateral that KFA has provided is enough to see that a loss does not occur. Even if it does make a loss, it will not impact Srei directly,” said a senior analyst from a leading brokerage group.
In November 2010, the airline’s loans were restructured. However, Kingfisher began to default on payments and loans to it turned non-performing assets for most lenders in the third and fourth quarters of 2011-12.
At a September 2 meeting with lenders in Bangalore, the airline’s management did not present a satisfactory road map for tackling the crisis and beginning repayments. The company, however, repeated its demand for immediate funding assistance.
