The Telegraph
Tuesday , July 3 , 2012
Since 1st March, 1999
CIMA Gallary

ICICI sells Kingfisher debt

Calcutta, July 2: A global debt fund managed by Srei Infrastructure has bought ICICI Bank’s Rs 430-crore loan to ailing Kingfisher Airlines.

India Global Competitive Fund (IGCF), which bought ICICI Bank’s entire outstanding debt exposure, is managed by Srei subsidiary Srei Venture Capital.

“The debt is backed by various securities, including shares of the airline, and we found the returns from this securitised debt deal remunerative going forward. We saw an opportunity in this deal,” said Srei Infrastructure Finance vice-chairman Sunil Kanoria.

Kanoria declined to give any details of the deal — the discount at which the loan book has been bought, the yield on the loan and so on. As in the case of any securitised debt deal, India Global will earn the interest to be paid by Kingfisher.

The arrangement works like this: suppose, ICICI Bank had given Kingfisher a loan of Rs 100 at an annual interest rate of 8 per cent or Rs 8 per annum. If India Global buys the loan for, say, Rs 80, the fund will continue to earn an interest of Rs 8 from Kingfisher. So, the yield on the investment by India Global increases to 10 per cent compared with 8 per cent enjoyed by ICICI Bank.

In case Kingfisher fails to repay the loan, India Global can sell the collateral kept by Kingfisher to secure the loan from ICICI Bank. If the value of the underlying collateral is worth Rs 100, India Global stands to make a gain of 25 per cent on its investment of Rs 80 by selling the securities for Rs 100.

However, he clarified that Srei Infrastructure Finance has not acquired the debt. “It is one of the global debt funds that we manage that has struck the deal with ICICI Bank,” he said.

“This loan by ICICI Bank to KFA is well backed by collateral of various securities and they (IGCF) saw an opportunity so they have made that investment,” Kanoria said.

With ICICI Bank selling the securitised debt to Srei, all the underlying securities accrue to Srei with the debt.