With no viable option left, the lenders to the debt-ridden Kingfisher Airlines (KFA) are set to take the “final call” on settling their outstanding dues after the proposed meeting with the company’s chairman - Vijay Mallya. However, the company is yet to give any confirmation on its schedule.
With no viable option left, the lenders to the debt-ridden Kingfisher Airlines (KFA) are set to take the "final call" on settling their outstanding dues after the proposed meeting with the company's chairman - Vijay Mallya. However, the company is yet to give any confirmation on its schedule.
It has been almost a year since the loan account slipped into the sub-standard category, the first level of non-performing assets (NPAs). Banks will now start marking down it as doubtful asset, the second level of NPAs. It will raise the provisioning requirement from 15% to 30%. A consortium of 17 lenders loaned around Rs 8,000 crore to KFA.
"We are banking on the proposed meeting with Dr. Mallya, who has been assuring us on overseas investments in the company. If he fails to deliver anything concrete in the meeting, we will take our final call to close the chapter. For banks, his presence is most important in the discussion. We cannot afford to bear rising burden of the debt any more," a top bank official from a public sector bank moneycontrol.com.
Meanwhile, global spirits major Diageo, and Vijay Mallya-owned United Breweries Holdings and United Spirits recently announced agreements under which Diageo would acquire a majority stake in United Spirits.
UB Holdings, which is corporate guarantor to KFA sold its stake in United Spirits at Rs 3,500 crore. Banks have argued that UB should pump in funds to KFA out of the sales proceeds. They have already conveyed it to the KFA management.
Company liquidation - A viable option?
It does not seem so. The value of securities given against the loan has depreciated drastically. KFA shares were at Rs 64 when pledged against the loan. Currently, they are trading around Rs 13. Chances of selling aircrafts to realize some funds remain bleak. KFA had a fleet of 66 aircrafts but has now reduced to 5-10. All of them, according to bankers, are on lease basis. Hence, creditors cannot sell those.
"The value of collaterals has sharply decreased. Moreover, KFA has not yet provided any enhancement of securities. KFA staffers are also agitating. If banks go for liquidating the company, they would get liabilities only. Sooner or later, we have to reach a conclusion. We cannot carry it on our books perpetually. If we write off the entire exposure, it will be a direct hit to our profit margin," said another banker dealing with the case.
In the last one year, KFA shares plunged nearly 46% as against more than 100% spike in the share price of Jet Airways, one of the two listed aviation entities.
Kingfisher Air stock price
On October 23, 2014, Kingfisher Airlines closed at Rs 2.10, up Rs 0.10, or 5.00 percent. The 52-week high of the share was Rs 6.25 and the 52-week low was Rs 1.72.
The latest book value of the company is Rs -166.59 per share. At current value, the price-to-book value of the company was -0.01.
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