All’s not well at Kingfisher Airlines (KFA)

The weekend has been super busy for the management of the airline at Bangalore as they rush to make

Image by schuey via Flickr

amends with various stakeholders, governments recommend their case, FDI in Airlines gets approved. None of the banks have a large chunk of the exposure as one round of recast touched only 1000 crores in April-June 2011. The 65 bln debt then grew back to 75 bln and the airline seemingly never got around to issuing mor eequity.

A t this stage however, the airline has been quick to line up assets for sale, the banks having asserted a requirement of 800 cr or more in equity before restructuring is taken up and lines are extended for working capital(operational costs incl fuel and Salaries) 120 pilots ahd not turned up for duty on Friday and govt oil marketing companies assert that 2 months dues are pending. Lessors for the 120-140 aircraft fleet want their aircraft back as leases are treated as monthly rentals and each day costs the lessor more than KFA, es as bankruptcy administration becomes an option.

Sale of Kingfisher House (Mumbai) and even UB real estates KF World towers luxury residences in Bangalore will be mulled and prioritised  and the airline management has come back with a plan to reduce debt by half. It is not clear however how much of this will be restructured and how much will come from

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asset sales. We also mistakenly mentioned Diageo as an equity partner for UB, the flagship spirits and beer business of the company worth $1.5 bln in Spirits and $750 mln in beer sales annually at 60% and 50% national share of business. (India’s alcoholic beverages industry s at less than 5% of evental market size today as beer consumption comes to less than 1/2 case a year (per capita) USL owns 40% in KFA and 100% of the sports and real estate businesses(group stake in JV with Prestige and others). In spirits, he owns White & Mackay’s brands ($1 bln) and may bid for other premium brands like Teachers owned by Fortune Brands (US). A great biopic of Vijay Mallya is available on Scribd

Unsurprisingly, promoter Vijay Mallya finds govt taxes and regulation to be the basis of all his troubles. FDI in airlines is probably out by next week as an option for the airline. Nevertheless, quick government and management action has reassured markets with 200 cancelations by the airline on the weekend of iots 469 flights a day schedule

Vijay Mallya also recently sold a majority stake in his Formula 1 team to local baddy Sahara grp being tried for corporate governance overruns by the securities regulator. The IPL team, which has been in the Top 3 in the game of cricket (T20) may also command a similar premium for sake sales but the group is unlikely to make any hurried sales in the fledgling businesses. However , the banks are unlikely to back down in their request for more equity as the leverage is quite high and despite the last restructuring/conversion to equity at a 60% premium to then pricing and a 200% premium to today’s price, banks alrdy hold a 23% stake in the airline.