* Airline told to develop "concrete steps" to improve
* Banks to recover $25 million by selling properties-banker
* Carrier's domestic market share has slipped from 2nd to
(Adds details, quotes, background)
By Swati Pandey
MUMBAI, July 5 Embattled Kingfisher Airlines
on Thursday won more time from lenders to develop a
turnaround plan while its bankers moved ahead with the sale of
two properties to recover a small fraction of what they are
Kingfisher, controlled by liquor baron Vijay Mallya, has
never made a profit in a struggling Indian airline industry and
has seen its domestic market share fall from second to last
among the six big carriers after grounding most of its fleet.
"They will have to come up with concrete steps to improve
operations in 15 days, otherwise we will have to take some other
actions," said an executive with State Bank of India,
which heads a consortium that met the airline on Thursday.
The banker declined to be named or give specifics.
Kingfisher, named after Mallya's flagship beer brand, had
debt of $1.4 billion at the end of March, and most of its banks,
which are mostly state-run, declared its loans to be in default
during the December quarter.
ICICI Bank this week said it unloaded its
Kingfisher debt to a fund managed by SREI Infrastructure Finance
Earlier this week lenders to the carrier, worried it will
fall short in its efforts to find a big investor, told Reuters
they were considering ways to recover their money including
invoking securities and guarantees against their loans.
Another banker at Thursday's meeting, which Mallya did not
attend, said little was decided.
"They made a presentation; they need fund infusion. We told
them again they need to get equity up-front. We are giving them
more time but we can't give them more money," the banker said,
also declining to be identified.
Known as the "King of Good Times" for his opulent lifestyle,
Mallya owns a Formula One racing team as well as a cricket team
and is a member of India's upper house of parliament.
Shares in Kingfisher pared early gains to close 0.42 percent
higher on Thursday, in line with the market. They are down 82
percent since the start of 2011, giving it a market value of
The government warned Kingfisher in March that its licence
to fly could be cancelled if it fails to adhere to safety norms,
which include financial viability.
Kingfisher has been hoping the government follows through on
a proposal to allow foreign carriers to own up to 49 percent of
Indian airlines, but the plan has been stalled for months.
Kapil Kaul, regional head of the Centre for Asia Pacific
Aviation, said Kingfisher needs an immediate equity injection of
Kingfisher has scaled back its fleet to 16 planes from 64,
stopped flying overseas, and has not paid staff since January.
"Lenders may need an informal political go-ahead to initiate
recovery and that stage has not reached. Otherwise, process of
recovery would have begun much earlier," Kaul said.
As of the end of March, Kingfisher's controlling
shareholders had pledged 90.11 percent of their holding in the
airline with lenders, while controlling shareholders of another
UB group company, United Spirits, had pledged 94.42
percent of their stake, according to Bombay Stock Exchange data.
"The caution/patience exercised by the lenders is largely
because it will have serious consequences for all UB group
firms," said Kaul.
SALE OF PROPERTIES
Banks expect to recover about $25 million from the sale of
Kingfisher properties in Mumbai and Goa, the SBI executive said.
Kingfisher said last year its loan repayment plan included
selling its Mumbai property, Kingfisher House, at an estimated
900 million rupees ($16.5 million).
"We told them you have to put these on the block and they
have agreed," the SBI executive said, referring to the Mumbai
and Goa properties.
In a statement after the meeting, Kingfisher said: "The
meeting was scheduled as an update meeting and there was no
discussion on commencement of recovery proceedings."
Sharan Lillaney, aviation analyst at Angel Broking, said the
move will help Kingfisher reduce its interest burden.
"Maybe if FDI (foreign direct investment) gets approved, and
interest rates come down and the debt situation becomes
manageable, they can still run the company," he said. "It's an
unlikely scenario, but it is still possible."
($1 = 54.4500 Indian rupees)
(Additional reporting by Anurag Kotoky; Editing by Tony Munroe
and David Cowell)