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Consortium of banks close in on Kingfisher Airlines’ properties to get back dues

Monday, 17 November 2014 – 7:15am IST | Place: Mumbai | Agency: DNA

The consortium of bankers fighting to get back their dues from Kingfisher Airlines may be able to auction a few properties owned by the airline and its promoter Vijay Mallya. They will also get rights over Rs 600 crore that SREI Venture Fund, a venture capital fund owned by SREI Infrastructure Finance, deposited in the Karnataka high court. The court has the receivership rights in this case. SREI Infra and its venture fund had sold off the entire 2.2 million shares for over Rs 1,200 crore. A portion of this money, on which even other lenders contested they have a lien, has been deposited in the court.

Kingfisher Airlines, once a leading carrier with world-class facilities, has been grounded for more than two years for want of finance. The company last reported its financial results for the three months ended December 2013.
Banks are also close to acquiring Mallya’s Goa villa and a commercial property, the Kingfisher House, in Mumbai. Bankers are ring-fencing Mallya by filing caveats in four different courts, so that one court cannot revoke the willful defaulter tag with which banks are trying to hook the company, unless it hears the bank’s petition.

A senior banker, who is part of the consortium, told dna, “We expect the money that SREI Finance has deposited to come back to us within a month. Banks’ contention is that even they have a lien on shares held by SREI Infra.”

SREI Infra owned United Spirits shares through its venture fund, while the parent company holds around 45-50%. The fund is managed by independent trustees. ICICI Bank, in July 2012, offloaded its Rs 430 crore debt of Kingfisher Airlines to this fund at a discount, which, in turn, received around 49 lakh shares in USL(United Spirits) as collateral.

Official associated with the SREI share sale said: “We have deposited Rs 600 crore in the Karnataka court in accordance with its orders. Now, the court will decide on the distribution of the proceeds.”

The fund has been gradually offloading the shares it held in United Spirits over the last two years. It had got the shares at the prevailing price of around Rs 850 per share, but when news of international spirits giant Diageo buying into United Spirits was out, the share price zoomed to Rs 3,000 by mid-2014. By June 2014, SREI had sold its entire tranche of 2.2 million shares.

SREI has been able to recover about Rs 600 crore of its own money (with interest). In addition, it deposited Rs 650 crore with the Karnataka high court, which has the receivership in the Kingfisher case.

In January, the high court admitted a winding-up petition filed by the SBI-led consortium of lenders, which is claiming dues of Rs 6,200 crore. The petition seeks liquidation of the airline.

Its debt touched Rs 7,500 crore by 2012. As the airline business continued to guzzle cash, it became unprofitable to run the airline and the operations came to a halt in 2012. Among the big lenders to Kingfisher were SBI (Rs 1,400 crore), PNB (Rs 700 crore), Bank of Baroda (Rs 500 crore) and ICICI Bank (Rs 450 crore)

Both the Bombay Stock Exchange and the National Stock Exchange of India will suspend trading of Kingfisher shares from December 1 for failing to comply with rules on reporting financial results, the bourses said in separate notices.

The exchanges will also suspend trading of UB Engineering Ltd, part of Mallya’s UB Group, from December 1, they said, citing the company’s failure to report financial results for two consecutive quarters to end-June.

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