Banks recall KFA loans, may encash Mallya’s securities

New Delhi/Mumbai: After waiting for almost a year, lenders led by State Bank of India on Tuesday decided to recall loans given to Vijay Mallya’s Kingfisher Airlines and encash shares that have been pledged with banks as collateral.

Subsequently, if loans adding up to Rs 7,500 crore and overdues of over Rs 1,000 crore are not repaid by the flamboyant businessman, who often drew comparisons with Virgin’s Richard
Branson, lenders will encash other securities, including Mallya’s personal guarantee and property. Already, banks are in the process of selling his villa in Goa to recover part of the dues.

Lenders will set up a subgroup that will look at the legal aspects of selling the shares, said a banker. A loan recall is an extreme step when banks are convinced that there is nothing that the promoter can do to revive a sick company. In Mallya’s case, the wait has been longer. With no end in sight, 17 banks that have exposure to the airline, once the symbol of luxury in the skies, finally decided to take the call at a meeting on Tuesday.

“The guarantees are in excess of loans outstanding. The personal guarantees will be invoked along with the loan recall. The recall process will include legal action against Mallya and Kingfisher Airlines,” a bank executive said.

BAD TIMES

• Kingfisher Air’s debts and other exposures add up to - 7,500 crore
• Overdue payments to banks amount up to - over 1,000cr
• If KFA is unable to settle lenders’ claims, banks may start encashing securities, including Mallya’s personal property

Shares owned by Mallya that are pledged to banks may be the first to be encashed End of road for Kingfisher Airlines?
New Delhi/Mumbai: The SBI-led consortium of lenders to KFA were disappointed that there was no proposal by Vijay Mallya to bring in substantial capital, which they had earlier hoped would happen after the liquor baron sold a big chunk of his business to UK’s Diageo. He said the banks could take legal opinion on how to deal with the Kingfisher brand which forms a major chunk of the collateral offered by the airline. Kingfisher—which Mallya launched as a gift for his son on his 18th birthday-—has been unable to come up with a feasible plan to restart operations, and its lenders’ consortium has decided that it is difficult to sustain the loan in such a situation, SBI deputy managing director Shyamal Acharya said.

While airline executives did not answer calls, Kingfisher CEO Sanjay Agarwal continued to put up a brave face. “Mr (Vijay) Mallya has assured salary payments, and we are currently working on a plan to fly again in the summer schedule,” Agarwal was quoted by a TV channel.

But the writing on the wall was clear for KFA which had stopped flying from October last year and did not have any slots in the winter schedule prepared by the Directorate General of Civil Aviation (DGCA).

Without a licence, it would be impossible for the airline to be part of the summer schedule that the DGCA is shortly finalizing.

“It is almost the end of the road for Kingfisher. The Airports Authority of India has already decided to give KFA’s slots to any airline that wants them. Now, even the private metro airports will do the same,” said an aviation official.

For Mallya, the pressure has been mounting as he has not paid salaries to employees. In fact, the wife of a Kingfisher employee committed suicide citing financial stress due to non-payment of salary. Besides, the “king of good times” has not deposited service tax collected from travellers and there are income tax arrears. There are arrears to oil companies as well as airport operators.

The financial woes have also impacted the bankrupt airline chief, prompting him to sell a stake in flagship United Spirits to Diageo in a bid to get much-needed cash. He even offloaded shares in Force India, his Formula One team, to Sahara.

But his personal lifestyle has not shown any dramatic change and despite not paying salaries and repeatedly defaulting on payments, Mallya has been visiting temples, including Tirupati, where he offered 3kg of gold.

Under pressure to keep the airline sector afloat, the government even changed rules, including allowing foreign carriers to buy 51% stake in Indian entities. While Jet Airways and Spice-Jet are close to tying up deals, Kingfisher has not been able to make much headway.

BANKING ON SECURITIES
Vijay Mallya had agreed to provide a long list of assets as security while finalising a loan restructuring in 2011. Now, banks will enchash these securities to recover the dues
Assignment/ hypothecation of ‘Kingfisher’ brand First charge on fixed assets, including equitable mortgage of Kingfisher House in Mumbai Equitable mortgage of Kingfisher Villa, Goa Mallya’s personal guarantee Corporate guarantee of United Spirits Escrow of credit card receivables, cash collections Non-disposal undertaking on 11 lease/ hire purchase aircraft Hypothecation of two helicopters

Pledge of shares by promoters

First charge on 2.6 million United Spirits shares and 10 million shares of Mangalore Chemical & Fertilisers that are pledged to SBI

Extension of charge on entire current assets
Maintenance of account servicing up to three months interests and instalments from Oct
Courtesy:
TIMES NEWS NETWORK
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SBI sends Kingfisher legal notice to recover its loans

Banks unsure of recovery despite selling USL shares
State Bank of India (SBI) has sent the beleaguered Kingfisher Airlines (KFA) a legal notice relating to the recovery of loans, bankers said on Tuesday. KFA can either suggest an out-of-court settlement or take legal recourse, in which case bankers will move the debt recovery tribunal (DRT), a banker explained.

Although the lenders have sold shares of United Spirits (USL) and Mangalore Chemicals and Fertilisers, banks are still not confident of recovering their entire loans from KFA. “It looks like we will have to invoke the corporate guarantees given by United Breweries Holdings (UBH) to recover the loans,” a banker with direct knowledge of the development said.

Last week, a consortium of 17 lenders, led by State Bank of India (SBI) sold off 26.5 lakh shares of USL. Banks had also sold pledged shares of Mangalore Chemicals and Fertilisers, realising around R100 crore.

KFA owes over R7,000 crore to lenders as per news reports. Consortium leader SBI has maximum exposure to Kingfisher at R1,800 crore.

Other lenders to the grounded airline are Punjab National Bank and IDBI Bank (R800 crore each), BoI (R650 crore), Bank of Baroda (R550 crore), United Bank of India (R430 crore), Central Bank of India (R410 crore), UCO Bank (R320 crore), Corporation Bank (R310 crore), State Bank of Mysore (R150 crore), Indian Overseas Bank (R140 crore), Federal Bank (R90 crore), Punjab and Sind Bank (R60 crore) and Axis Bank (R50 crore).

In his appeal to the Bombay High court on April 1, the debt-laden airline’s promoter Vijay Mallya had sought to restrain banks from selling the USL shares pledged with lenders for three weeks. However, the court ruled in favour of the banks the very next day, allowing them to go ahead with share sales to recover loans.

The UB Group, also promoted by Mallya, had reached an agreement with UK-based global liquor giant Diageo for sale of a majority 53.4% stake in USL for about $2 billion. The Diageo deal is currently in the process of completion and has been cleared by regulators like Competition Commission of India and Securities and Exchange Board of India. The deal includes an open offer for purchase of 26% stake from non-promoters.

Air pocket
* KFA can either suggest an out-of-court settlement or take legal recourse
* Last week, lenders led by SBI sold off 26.5 lakh shares of USL
* Shares of Mangalore Chemicals were sold for around R100 crore
* KFA owes over Rs.7,000 cr to lenders. SBI has maximum exposure at Rs.1,800 cr
Courtesy:
feBureau: Mumbai, Apr 10 2013, 01:55 IST
http://www.financialexpress.com/news/sbi-sends-kingfisher-legal-notice-to-recover-its-loans/1099920/0

KFA’s 15 leased planes may land in scrapyards

New Delhi: A majority of the 15 leased planes that still remain on Kingfisher Airlines’s (KFA) name may be headed to the scrapyards. While 13 aircraft leased to the grounded airline have been de-registered from the airline’s name and will now be flown out of India, lessors of 15 planes have discovered that their Airbus planes are in simply no condition to fly.

“These lessors have discovered that aircraft parts have been so badly cannibalized that it is very difficult to restore the planes. In its last few months of operation (KFA stopped flying from October 1, 2012), the airline kept taking parts from its fleet to keep a handful of planes airworthy. Now the planes have been ravaged beyond repair and they can’t fly,” said a senior Airports Authority of India (AAI) official.

The planes rendered unfit to fly are the Airbus A-320s, each of which today costs upwards of Rs 500 crore and leasing a new one costs about Rs 2 crore per month at current rates. Now AAI brass are going to hold an internal meeting this week to see how precious airport parking slots occupied by these planes across Indian airports could be freed up. “The only way for these aircraft may be the junk yard. Lessors will drag KFA promoters to court to recover their losses,” the official said.

Lessors have not even applied to the Directorate General of Civil Aviation (DGCA) to get these 15 planes de-registered.

The reason: While allowing some planes to be de-registered last month, DGCA chief Arun Mishra had ruled that lessors will have to pay parking charges to airports from the date their planes cease to be in KFA’s name to the date they fly out. Something these 15 planes can’t do.

KFA till recently had 40 planes — 10 owned by it and 30 leased. Of the 30 leased, 15 are stuck on ground and 13 were de-registered. Two aircraft have been seized by service tax authorities. Aviation secretary K N Shrivastava recently met the tax authorities for freeing these planes but since they are coowned by the airline, they remain impounded.

Shrivastava, who is trying to restore India’s credibility in the eyes of foreign aircraft lessors so that other desi carriers do not find it tough to rent planes, recently made it possible for lessors to start re-possessing their planes rented to KFA but which had been impounded by various agencies the airline owed money, like airports, banks and tax authorities.

JUNKED JETS?
• In its final months of operations, KFA took parts from its fleet to keep a handful of planes airworthy
• Now 15 of these planes have been found to be ravaged beyond all repair and they can’t fly
• These are Airbus A-320s, each costing over Rs 500cr and leased for Rs 2cr a month
Courtesy:
Saurabh Sinha TNN
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Kingfisher lenders unsure about quantum of recovery

NEW DELHI: Even as lenders with over R7,000- crore exposure to the ailing Kingfisher Airlines have decided to sell pledged shares of United Spirits Ltd (USL) and invoke his personal guarantee to recover chunks of debt, they remain unsure of the quantum of recovery.

The recovery exercise is likely to fetch them an amount “which could be half of the total debt,” said banking sources. Besides, it is also likely to be a time-consuming affair.

“Though banks have decided to go all out with the recovery exercise, we, in all likelihood would fall hugely short of the total amount and that is worrying for banks and what is worse is the fact that Mallya has no intention of repaying the loan amount,” a senior executive of one of its private sector lenders told HT on the condition of anonymity.

The consortium of 15 banks led by the State Bank of India has recently embarked on the recovery process. SBI has an exposure of R1,410 crore to the beleaguered airline, promoted by UB Group chief Vijay Mallya. IDBI Bank, Punjab National Bank (PNB) and Bank of India (BoI) have exposures to the tune of R719 crore, R702 crore and R552 crore respectively to Kingfisher.
Courtesy:
    8 Apr 2013
    Hindustan Times (Mumbai)
    HT Correspondent letters@hindustantimes.com
http://paper.hindustantimes.com/epaper/viewer.aspx

Kingfisher: banks mull selling UB shares as first step

MUMBAI/NEW DELHI: Lenders to debt-ridden Kingfisher Airlines will consider selling shares of UB Group companies, pledged to an SBI-led consortium of 17 lenders that have a combined exposure of R7,000 crore, as a first step towards recovering their money.

Shares of Kingfisher on Wednesday plunged 5% to close at R10.6 on the Bombay Stock Exchange after lenders decided to start the recovery process following the KFA management’s failure to come up with a feasible plan to restart operations.

“We have shares pledged to the consortium of United Spirits. We also have some shares of Mangalore Chemicals and Fertilisers. These shares are lowhanging fruits. So, this should be the first line for us to recover the money,” said Shyamal Acharya, deputy managing director, SBI. “We expect some realisation at least from the sale of shares during this quarter itself.

Kingfisher Airlines CEO Sanjay Agarwal did not take calls or reply to messages sent byHT. The airline’s official spokesperson, too, declined too comment.

Meanwhile, aviation minister Ajit Singh made it clear that Kingfisher will not be allowed to fly unless the Directorate General of Civil Aviation was fully satisfied that the airline was capable of running smooth and safe operations.
COURTESY:
    14 Feb 2013
    Hindustan Times (Mumbai)
    HT Correspondents letters@hindustantimes.com
http://paper.hindustantimes.com/epaper/viewer.aspx

Money laundering: Govt probes Mallya

New Delhi: The government has initiated probes into alleged tax evasion by a number of top industrialists, politicians and others named in a list exposed by a recent global media investigative operation. Those being probed include Rajya Sabha member and chief of the ailing Kingfisher Airline, Vijay Mallya and industrialists and Lok Sabha member Vivekananda Kadam.

Finance minister P Chidambaram confirmed on Saturday that a probe had been ordered based on names unveiled by the International Consortium of Investigative Journalists (ICIJ) and its partner media houses.

“Yes. We have taken note of the names and inquiries have been put in motion in respect of the names that have been exposed,” Chidambaram told a news conference. He did not elaborate on the nature of the probe or which agencies were involved. A global journalistic investigation had exposed secret financial dealings of several politicians, industrialists and professionals in tax havens. Up to 612 Indians, including at least two parliamentarians and several industrialists, figured in the list.

Among Indians with accounts in the tax havens exposed by the ICIJ investigation were industrialists such as Ravikant Ruia, Teja Raju, Samir Modi, Chetan Burman, Abhey Kumar Oswal, Rahul Mammen Mappillai, Saurabh Mittal, Sonu Lalchand Mirchandani and Vinod Doshi.

Some are NRIs, and therefore could legitimately use tax havens, while others have denied opening accounts in British Virgin Islands or other tax havens.

On a query on the Cobrapost sting operation that alleged money laundering by top private lenders — ICICI Bank, Axis Bank and HDFC Bank — he said action would be taken if there is any violation of laws.
Courtesy:
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DVB Bank Again Tries to Reclaim Planes from KFA

German bank to send team to India to get aircraft leased to Kingfisher deregistered

Germany’s DVB Bank, the world’s largest aviation financing bank, is sending a team to India next week to get two of its planes leased to grounded Kingfisher Airlines deregistered so that it can reclaim its property. This will be its second attempt to resolve the issue. If the team fails, the German bank will seek legal recourse. It has already filed a suit against the Indian regulator and Kingfisher in December, as the authorities were not willing to deregister the aircraft then. DVB has already announced it is halting all financing to Indian airline companies based on this experience.

The team will be meeting all stakeholders in New Delhi and put up its case for ending the Kingfisher lease and get the aircraft de-registered from India so that this wasted asset can be leased to other carriers or for any other usage it has in mind.

The two planes were sent to Turkey for repair and maintenance where DVB seized these. However, unless the planes are de-registered in the lessor country, the German bank can’t lease them to other carriers or sell them. The regulator’s stand so far has been that apart from DVB, there are other creditors, so it has to take the consent of these before de-registering the planes.

Recently, the civil aviation ministry decided that all 15 of the deregistered aircraft that are no longer held under a Kingfisher lease would be released to the respective leasing firms and a note to that affect would be circulated soon. Earlier, the authorities including the Airports Authority of India had decided that till such time the bankrupt airline does not clear dues, they would not release the aircraft. Reacting to the development, the German bank said this move of the government does not impact it directly but is positive and it hopes that there would be some solution found in the meeting on March 25 when they meet all the parties concerned.

“Although this is not directly applicable to DVB’s situation, where DGCA so far has not deregistered our two aircraft which already are outside India, it increases our hope that in our next meeting with the DGCA on March 25, 2013, to which all relevant parties in our case have been invited by the DGCA, we can convince the authority that there is no reason not to deregister our aircraft, and thereby avoid the need to obtain a decision from the New Delhi HC on April 8, 2013,” said Carsten Gerlach, senior vicepresident, aviation finance, DVB Bank, in a mailed response to ET’s query.

Other leasing firms will benefit from the government decision, he said. “DVB views the announcement of the release of ex-Kingfisher aircraft from their current grounding at Indian airports a further encouraging sign of the willingness of the Indian government and administration to finally help the international aircraft leasing and finance community to recover their assets originally on lease to Kingfisher Airlines and move on,” Gerlach said.

Attempts to reach the director general of civil aviation Arun Mishra for a comment failed as he is currently out of India. He did not respond to a message sent to him on the same issue either.

Striking a pessimistic note, sources within Kingfisher said that it might not be easy for the German firm to conclude the issue within a single meeting.
Curtosy:
MANISHA SINGHAL MUMBAI 
manisha.singhal@timesgroup.com  
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