The consortium of lenders led by State Bank of India (SBI) has taken an in principle decision to recall the loan given to troubled Kingfisher Airlines, thus putting a possible end to the Kingfisher saga.
Seventeen banks have an exposure of Rs.7,000 crore to Kingfisher Airlines. The banks have now said the Kingfisher loan matter had reached a dead end.
“We gave them enough time. They are not saying anything new or credible. Banks did not find any progress by the airline’s promoters to restart operation or get money on the table. We gave them over two months but nothing concrete happened. Banks have run out of patience. Consortium members felt that the matter has reached a dead end. Here is a case for may be for the termination of relationship (with Kingfisher). So we decided to consider recalling the loan,” said Shyamal Acharya, Deputy Managing Director, State Bank of India.
“Now each bank will go back to their respective boards to take the final approval for the recall of loan. I think the final decision will come in 10 days after which the recovery proceedings will start in due process of law,” Mr. Acharya told waiting journalists at the Trident Hotel in Mumbai.
Banks had to consider this drastic step as the airline’s management could not come up with any credible revival plan. Its flying licence has been cancelled since January 1, 2013. It stopped flying since October 1, 2012, following a strike.
“The Kingfisher management only said that they were trying to revive the airline and waiting for money to come from the Diageo deal. They said it was a complex deal and it would take time. But we were not satisfied as Kingfisher is a different company nothing to do with Diageo deal,” Mr. Acharya said.
With this, banks will start recovery proceedings to get whatever possible from the troubled airline. Apart from mortgaged shares of United Spirits and other group companies, Kingfisher Airlines Chairman Vijay Mallya has given personal guarantee for the loans. The Kingfisher brand with a previous valuation of over Rs.4,000 crore has been mortgaged with the banks. The Kingfisher Villa in Goa and Kingfisher house near the Mumbai airport are mortgaged. Bankers did not quantify as to how much they could recover but they are prepared to take a haircut.
UB Group CFO Ravi Nedungadi, who participated in the meeting along with Kingfisher Airlines CEO Sanjay Aggarwal, said that he would not negotiate (with the banks) through the media.