Government rules out second round of debt restructuring for Kingfisher

New Delhi/Mumbai: With market analysis suggesting that attempts to restructure massive debt incurred by struggling airlines may impact the capital adequacy ratios of lender banks, the government has clarified that state -owned banks have no plans for a second round of restructuring of loans to private carrier Kingfisher Airlines.

The statement was made in Parliament by the junior minister of finance on Friday.

Kingfisher, now India's third largest airline, issued shares to a consortium of 13 banks led by State Bank of India in the month of March and allotted shares to its founders in a restructuring process that helped pare debt.

"State Bank of India, leader of the consortium, has stated that at present there is no such plan," minister of state, finance, Namo Narain Meena said in Parliament, in answer to a query whether banks are planning to carry out a second restructuring of loans.

Government documents show that 19 banks have an exposure of Rs6419 crore to the airline. SBI, India's largest lender, has the maximum exposure of Rs1457 crore as of end-November.

"The repayment to SBI in respect of advances by Kingfisher Airlines will commence from September 2012.

Servicing of interest is being done with some delay," Narain Meena said in a written reply to the Parliament.

Kingfisher owner, liquor tycoon Vijay Mallya has been advised by banks to ensure equity infusion into the airline.

The airline, by now a serial defaulter on payments to staff, lenders and vendors cancelled hundreds of flights in November in a bid to cut costs and exit loss-making routes. It has now been put on cash-and-carry basis by Mumbai airport and service tax officials have frozen 11 of its bank accounts for non-payment of dues.

State-owned carrier, Air India, is in a similar state, owing huge amounts across the industry spectrum of staff, lenders and vendors.