The Telegraph
Wednesday , February 13 , 2013
Since 1st March, 1999
CIMA Gallary

Banks plan to recall Kingfisher loans

New Delhi, Feb. 12: A consortium of lenders, led by the State Bank of India, today decided to recall all loans given to Kingfisher Airlines.

Following a meeting of the lenders and company executives today, an SBI official said the banks would begin recoveries after taking legal advice.

Shyamal Acharya, deputy managing director (associates & subsidiaries) of the SBI, said the recall would include promoter Vijay Mallya’s personal assets that had been pledged with the lenders. “Each bank would have to deal with its loan on an individual basis and it is up to the management of the respective bank to take a call on whether to recall its loan to the ailing carrier,” he said.

Analysts said the move was a way to make Kingfisher bring money to the table. Many believe Mallya can easily tap into the cash reserves of group companies and the proceeds from the sale of a stake in the distillery business. Kapil Kaul of aviation consultancy CAPA said, “There could be a negotiated settlement in the coming days.”

The lenders had made it clear to Kingfisher that it needed to bring in at least Rs 2,000 crore to resume operations. They had also threatened to take legal action if the airline did not come up with a viable revival plan.

Acharya said the lenders would take a call on selling the Kingfisher brand at a later date. According to SBI officials, the Kingfisher management only reiterated certain assurances at the meeting, prompting the 17-bank consortium to take the decision. “We have no other option left with us but to recall our loans.”

Officials said if Kingfisher failed to respond to the loan recall demand, the recovery process will start.

Acharya said banks would take a hit if the recall process started. “In any recall process, banks take a haircut (losses) but as of now we are not sure of the percentage of cut that we might have to take,” he said, adding that the entire collateral will probably be offloaded to recall the loans.

The consortium has given loans amounting to Rs 7,000 crore to Kingfisher.

State Bank alone has an exposure of Rs 1,500 crore, which has not been serviced since January, 2012.