Banks put Kingfisher Airlines’ Mumbai airport assets on the block

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Lenders to Kingfisher Airlines have decided to auction the grounded carrier’s assets located at Mumbai’s Chhatrapati Shivaji International Airport including aircraft pullers, tractors and cars in a bid to recover a small part of the outstanding loans of Rs. 6,963 crore. SBI Caps — the merchant banking arm of State Bank of India — is managing the e-auction, which will be held on Dec. 7, with the reserve price set at Rs. 65 lakh.

The decision to auction the moveable assets at the Mumbai airport comes three years after the carrier halted operations. SBI, the largest lender in the consortium, had declared Kingfisher Airlines and United Breweries Holdings as wilful defaulters – preventing the two companies from accessing further bank loans. Kingfisher Airlines is named as the borrower and its promoter Vijay Mallya and United Breweries Holdings are listed as guarantors. A mobile text message to Mr. Mallya didn’t immediately get a response and a spokesperson for the airline wasn’t available for comment.

Kingfisher Airlines stopped flying in October 2012 and the airline’s permit was suspended by the Directorate General of Civil Aviation in the same month. The carrier defaulted on its loans despite a debt restructuring in 2011. Banks had agreed to have 10 per cent of the debt converted into equity and had bought shares of Kingfisher Airlines at a 61 per cent premium. The lenders’ attempts to take possession of a palatial villa in Goa belonging to Mallya have also been stalled by litigation.

Interestingly, the reserve price of Rs. 65 lakh is less than 0.01 per cent of the outstanding loans. Although Kingfisher Airlines was at one time one of the country’s largest airlines, the carrier’s aircraft fleet was lease financed and most of the loans were advanced against a guarantee from United Breweries Holdings and on the strength of the Kingfisher brand.

Most of the banks have classified the loans to Kingfisher Airlines as non-performing. The banking regulator has tightened norms to tackle wilful default and a draft bankruptcy code was recently put in the public domain.

 

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