Kingfisher to sell property to fly out of debt crisis

Kingfisher Airlines Ltd. | Airlines | Travel & Hospitality | BSE: 532747 | NSE: KFA

14 Nov 2011 Evaluate

The board of Kingfisher Airlines (KFA) will consider a proposal to cut debt by more than half by selling property, converting loans from its parent company into equity, and changing the terms under which it leases aircraft. The management of the airline, which has cancelled 200 flights in the past week, leading to fears it is close to bankruptcy, plans to reduce debt from Rs 6,500 crore to Rs 3,000 crore. The management is likely to propose a preferential issue of equity to the promoters and other investors, meeting a key demand of banks that are insisting Vijay Mallya, the flamboyant tycoon who owns the airline, infuse equity into the troubled carrier. Kingfisher is promoted by Mallya’s UB Group, which owns United Spirits, India’s biggest liquor company. The UB Group will also convert Rs 675crore of debt into equity as part of the plan to pare debt.

The preferential issue of equity, if approved, will replace a rights issue of Rs 2,000 crore approved by the board in August. Once these plans are approved, Kingfisher will approach banks for up to Rs 500 crore of working capital to buy fuel and pay salaries. Kingfisher’s lenders have made it clear that the airline would have to come up with a credible business plan.