Bloomberg News

Kingfisher Air Pledges Brand, Furniture for $1.2 Billion Loans

December 12, 2011

Dec. 10 (Bloomberg) -- Kingfisher Airlines Ltd., the Indian carrier seeking cash after losses, pledged assets ranging from its brand to office furniture for bank loans of as much as 64.2 billion rupees ($1.2 billion).

A luxury villa in the western Indian state of Goa, two helicopters, a building in Mumbai and shares have also been used as collateral for loans as of Nov. 30, Junior Finance Minister Namo Narain Meena said in response to a question in parliament in New Delhi yesterday. The total value of the guarantees, including furniture and fixtures worth 3.3 billion rupees, was 52.4 billion rupees, he said.

Vijay Mallya, Kingfisher’s billionaire chairman, said on Dec. 5 that the airline will meet lenders this week to seek working capital loans to pay for operating costs and fuel. Kingfisher has also cut flights, scrapped low-cost services and delayed Airbus SAS A380s deliveries as part of a turnaround following 16 straight quarterly losses.

The brand loan of 41 billion rupees was based on a valuation made by accounting firm Grant Thornton as of April 23, 2010, he said. The airline then had a market value of 13.2 billion rupees, which has since fallen to about 11.9 billion rupees, according to data compiled by Bloomberg.

Debt Revamp

The airline will start repaying loans to State Bank of India, the nation’s biggest lender, from September 2012, Meena said. He didn’t comment on the other 18 lenders of a group that has lent to Kingfisher.

The carrier, based in Bangalore, got as much as 12.1 billion rupees of new loans earlier this year after banks converted 13 billion rupees of existing debt into preferred shares. State Bank has no plans for a second round of debt restructuring for the airline, Meena said.

Kingfisher fell 3.8 percent to 23.95 rupees in Mumbai trading yesterday. The stock has declined 64 percent this year, compared with a 21 percent drop in the BSE India Sensitive Index.

Kingfisher and Jet Airways (India) Ltd. have lost a combined 63 billion rupees in three years as low fares and rising fuel prices offset gains from surging passenger numbers.

Indian tax authorities will pursue legal action against Kingfisher after it failed to pay service tax in the fiscal year that began April 1, S.K. Goel, chairman of Central Board of Excise and Customs, told reporters in New Delhi yesterday.

Prakash Mirpuri, a spokesman at Kingfisher, declined to comment on the tax dues.

The carrier plans to raise about 10 billion rupees in new loans, Ravi Nedungadi, chief financial officer at parent UB Group, said Nov. 15. The company may also hold a rights offer before the end of March and sell property in Mumbai for funds.

Kingfisher has about $1.4 billion of debt and a debt-to- asset ratio of 82 percent, according to data compiled by Bloomberg. Jet Airways’ ratio is 67 percent, while SpiceJet is at 7.7 percent.

--With assistance from Tushar Dhara in New Delhi. Editors: Sam Nagarajan, Arijit Ghosh

To contact the reporters on this story: Karthikeyan Sundaram in New Delhi at kmeenakshisu@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net


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