Kingfisher Air may convert Rs 690cr of debt to pref shares

Sources have told CNBC-TV18 that Kingfisher Airlines is restructuring its debt and will convert Rs 690 crore of its existing debt into preferential shares, reports CNBC-TV18's Vidhi Godiawala.

Below is a verbatim transcript of her comments on CNBC-TV18. Also watch the accompanying video.

Rs 6000 crore of its total debt across 12 banks is being restructured. Sources indicate that Rs 690 crore of the existing Rs 6000 crore is being converted into preference shares at 7.5%. Also, promoters will be bringing in additional Rs 745 crore equity within the next six months. Of that Rs 690 crore, Rs 55 crore will be in the form of preference capital.

Also lenders are going to be bringing in additional bank guarantees of Rs 400 crore which is required for payments to HPCL, said sources. Banks will be giving in additional support of Rs 500 crore capital to Kingfisher Airlines in the entire debt restructuring package, also what our sources are indicating to us is that UB Holding as given financial guarantee for the existing Rs 6000 crore debt and the new loans which the banks will be giving of Rs 400 crore guarantees and Rs 500 crore of the additional debt.

RBI has told banks to maintain the same asset classification for Kingfisher Airlines in this entire restructuring as of March 31, 2010, which means if a bank has classified it as non performing asset as on the last quarter of FY10, it will remain that. So if it's a standard asset it will remain standard, but if it is NPA it will remain NPA.

Bank of India which has classified Rs 375 crore as NPA of Kingfisher, its exposure to Kingfisher Airlines as on the last quarter of FY10 will actually remain NPA. Also Vijaya Bank had also classified about Rs 25 crore which will also continue to remain NPA. Most of the lenders have given their approval for the same package and they are going back to their individual boards to get this cleared. Within 120 days of the approval given by RBI they will be implementing this package.