UB wraps up Rs 400 cr debt for Deccan deal

UB Holdings, which is in the process of acquiring 46 per cent stake in Deccan Aviation, has wrapped up raising the Rs 400 crore debt to part-finance this acquisition.

UB Holdings, which controls Kingfisher Airlines, will be paying out close to Rs 975 crore for the acquisition.

The entire Rs 400 crore debt has been raised locally and will enable UB Holdings to close the first tranche of payment to Deccan Aviation's promoters and major shareholders.

According to the deal announced at the end of May 2007, UB Holdings is acquiring 26 per cent, being made on a preferential basis of fresh equity shares, from Deccan Aviation for Rs 550 crore.

Subsequently, UB Holdings will make an open offer for an additional 20 per cent, estimated to cost around Rs 425 crore. The open offer window is between July 25-August 13, 2007 and will be made at Rs 155 an equity share.

Post the successful completion of the open offer, the Kingfisher-Air Deccan group will become the largest domestic airline, controlling 32 per cent market share with a fleet of 71 aircraft, including 41 Airbus aircraft and 30 ATR aircraft.

The combined operations will cover all segments of air travel from low fares to premium fares and offer up to 537 daily flights connecting 69 cities in India.

When the deal was announced, UB Holdings had paid Rs 150 crore to Deccan Aviation on an immediate basis.

UB Group president and CFO Ravi Nedungadi confirmed the move to raise Rs 400 crore debt from a clutch of local financial institutions and banks. According to information available, UB Holdings in the late 2006 had raised a debt of $80 million for the operations of Kingfisher Airlines.

He added that they were going slow on the decision to raise private equity to fund the expansion of Kingfisher Airlines.

"We are not pursuing that line as of now. We need to figure out how the operations of Kingfisher Airlines and Air Deccan will be integrated. Post integration, we will revisit how much we need to raise through the PE route, if required," Nedungadi said.

UB Group, in the two years of Kingfisher Airlines, had twice come close to raising around $150 million from global PE funds.

In addition to the debt of Rs 400 crore, UB Holdings has executed guarantees in favour of banks and aircraft leasing companies aggregating to a total of Rs 1,633 crore on behalf of Kingfisher Airlines in the past two years.