Kingfisher continues to be NPA, but can overcome crisis says SBI chief

New Delhi, Jan. 19 -- Though observing that the troubled Kingfisher Airlines is still a non-performing asset (NPA), the State Bank of India (SBI) has expressed confidence that the company had the ability of overcoming its financial crisis as it is still a "good brand".

which is the largest creditor to the airline company, underlined its faith in the Vijay Mallya-led enterprise.

"(Though) Kingfisher continues to be an NPA (non- performing asset)...We still have faith in the company. It is a good brand," SBI chief Pratip Chaudhuri told reporters here.

The loans to Vijay Mallya-promoted airlines, he added, are NPAs but "I don't think Kingfisher loan has reached that stage that loan would have to be sold".

The Kingfisher account has become a bad asset for the bank for last one month, Chaudhuri said, adding "the (promoters of) company will have to infuse more equity."

Although the carrier has not yet come out with any proposal, Chaudhuri said, with more favourable environment and business plans it should be able to come out of its current problems.

"We are working with them to cure the default. When default is cured normal operations in account have to be resumed," he said.

SBI, the leader of the consortium of banks that have lent funds to Kingfisher Airlines, has an exposure of Rs 1,457.78 crore to the struggling firm. SBI's exposure is the highest among any of the lenders to the airline. It is followed by IDBI Bank ( Rs 727.63 crore), Punjab National Bank (Rs 710.33 crore), Bank of India (Rs 575.27 crore) and Bank of Baroda (Rs 537.51 crore).

The carrier is in a financial mess and struggling to service its loans, which have run up to over Rs 6,000 crore. Mallya is understood to have written to Civil Aviation Minister

Ajit Singh seeking help on extending the time for repaying the banks and credit for its jet fuel requirements.

When asked about the Air India loan, which is also under serious financial stress, the SBI chief said banks are comfortable with the state-run carrier.

Air India is a Central Government-owned airline.... lenders' comfort with Air India is complete and absolute," he said, adding though that it would be "difficult" for lenders to contemplate additional credit to it.

The Air India is sitting on a mountain of debt totaling Rs 69,000 crore, out of which Rs 42,000 crore was for fleet acquisition and the rest was for working capital loans taken from 14 lenders led by SBI.

Banks are considering various alternative, Chaudhuri said. "There are number of options in the financial structure. It could be loans, it could be bonds, it could be a government guaranteed bond. So, all these are on the table. It is a complex matter and it is being discussed."

Asked as to by when the final decision on the debt recast would be taken, he said, if there is common view emerging it could be today, if it is not emerging, may be then we will have a subsequent meeting and then finalise.

The Government has asked the lenders to finalise the decision on Air India debt recast ahead of the meeting of the Group of Ministers (GoM) on January 31.

"Certainly January 31 is a comfortable timeline and we would able to come back with the proposal," he said.

Under the financial restructuring plan, Rs 11,000 crore out of the working capital loans of around Rs 27,000 crore would be converted into long-term debt and Rs 7,000 crore would be converted into cumulative redeemable preferential shares. Published by HT Syndication with permission from Pioneer. For any query with respect to this article or any other content requirement, please contact Editor at [email protected]