Kingfisher Air Should Raise $1 Billion of Capital, Lender Says

Kingfisher Airlines Ltd. largest lender said the cash-strapped Indian carrier should raise at least $1 billion of fresh capital, stepping up pressure on Chairman Vijay Mallya to deliver on promises of new investment.

“We are slightly disappointed at the pace at which the capital-raising plan is going,” State Bank of India Chairman Pratip Chaudhuri told reporters in Gurgaon, near New Delhi, today. “The company has been assuring us that they have been working hard for it, but we would like to see some tangible evidence.”

Kingfisher, which halted flights about five weeks ago, needs to raise new funds this month, Chaudhuri said, without saying how much. He declined to give a timeframe for when the Bangalore-based company needs the full $1 billion. Kingfisher owed 14 billion rupees ($259 million) to the bank as of February.

Liquor tycoon Mallya has spent about a year trying to sell a stake in Kingfisher as he seeks funds to ease an 86 billion- rupee debt pile. The carrier, whose market value has slumped to $191 million, is also working on a turnaround plan as it seeks to resume operations and to persuade regulators to re-activate its suspended license.

“Until they restructure, nobody will be interested in Kingfisher,” said Jasdeep Walia, an analyst at Kotak Securities Ltd. in Mumbai. “Everything the airline owns is locked away as collaterals for loans.”

Diageo Talks

The carrier’s founders have contributed 11.5 billion rupees to the company since April 1, Mallya told shareholders at the company’s annual meeting Sept. 26. Mallya is also in talks to sell a stake in liquor business United Spirits Ltd. (UNSP) to Diageo Plc as he seeks cash.

Kingfisher employees resumed work Oct. 25 after the airline agreed to pay four months’ of unpaid wages by Dec. 24. A walkout sparked by overdue salaries prompted the flight shutdown last month. The regulator subsequently suspended the carrier’s operating license and rejected its request for flight slots during the country’s winter.

The airline is preparing a “comprehensive” revival plan, Prakash Mirpuri, a spokesman, said in a statement yesterday. The company doesn’t comment on banking relationships, he said today.

Kingfisher has 10 airworthy planes, down from 66 in the year ended March 31, 2011, according to Arun Mishra, the director general of civil aviation.

The airline has tumbled 39 percent this year in Mumbai trading. It rose 2 percent to 12.80 rupees today. State Bank owns 3.5 percent of the carrier after converting debt to equity in the year ended March 2011.
Jet, SpiceJet

Jet Airways (India) Ltd., the nation’s biggest listed carrier, and budget airline SpiceJet Ltd. have both more than doubled in Mumbai trading this year, partly because of Kingfisher’s flight cuts paring competition. Jet’s domestic revenue jumped 35 percent in the quarter ended September.

Mallya’s UB Group will invest in Kingfisher to help revive operations, an Indian government official said Oct. 26, after a meeting between the regulator and the airline’s chief executive officer. The carrier must prove it has adequate funds to pay airports, fuel suppliers and other vendors before the license suspension can be lifted, said the official, who declined to be identified citing rules. 

http://www.bloomberg.com