Further woe for Kingfisher as banks delay debt restructuring

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By TESTCustomwebLP TESTCustomwebLP October 4, 2010 14:33

Further woe for Kingfisher as banks delay debt restructuring

Banks working to restructure the debt packages of both Kingfisher Airlines and Paramount are reported to have approached the Reserve Bank of India (RBI) to treat aviation debt as standard assets rather than restructured debt to enable the banks to reduce provisioning. If the banks don’t receive this special dispensation from the RBI now, they have threatened to delay the debt restructuring for the airlines, which could be severely damaging for Kingfisher in particular that stated last week it was considering a rights issue (see Aviation News, editorial comment from October 1)

The Kingfisher restructuring deal includes allowing a two-year moratorium on short-term debt, lowering the interest rate and converting part of the domestic debt into external commercial borrowings or cumulative convertible preference shares.

Kingfisher is at the mercy of the RBI – If the RBI decides not to grant the requests of the banks then there is a distinct possibility that the airline will have to revise it’s plans in part or full, this in any event will delay recapitalisation and risk the airline falling further from salvage. This is a fluid situation and anyone interested in the future of Kingfisher should watch this space.

Kingfisher had a combined debt of Rs 7,413 crore at the end of December 2009. It posted losses of Rs 1,647 crore at the end of March 2010.

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By TESTCustomwebLP TESTCustomwebLP October 4, 2010 14:33
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