Bankers who met the airline management on Tuesday said they have decided to consider legal advice to recover their debt from the company. The recall involves a legal procedure including sale of Kingfisher assets banks hold as collateral, said a banking source.
Banks will refer the issue to a legal consultant. “There are several ways to do the recall. Each lender will have to get board approvals before starting the procedure,” the consultant said.
Lenders have already classified Kingfisher as a non-performing asset (NPA) and made provisions for some losses. Some lenders were preparing to write off these debt as unrecoverable losses.
The problem has compounded as there is no collateral to back one-third of the total Rs 7,500 crore loan. State Bank of India with Rs 1,400 crore has the maximum exposure in the airline. Collateral given by the promoters and directors of Kingfisher may not be enough if banks resort to recovery by sale of assets and other measures.
“The pledged assets may not be worth more than Rs 1,500 crore to Rs 2,000 crore,” said a banking source. Loans guaranteed by directors and others of Kingfisher Airlines is Rs 4,146 crore while its total borrowings (both long term and short-term) were over Rs 8,000 crore, according to Kingfisher’s Annual Report for fiscal 2012. The troubled airline’s long-term borrowings alone amounted to Rs 5,695 crore, it says.
Moreover, banks made another mistake by converting a portion of their loans into equity in 2010 at a premium, that too at a time when the ailing airline was not getting enough equity from the promoters.
The airline reported a third quarter loss of Rs.755.17 crore as against Rs.444.26 crore a year ago due of high finance costs, redelivery of planes and costs associated with the grounding of its aircraft.