* Creditors won't consider debt deal before equity infusion
* Kingfisher considering sale of real estate in Mumbai - banker
* Shares recover 7.6 pct after plunging as much as 18 pct on Friday (Recasts with comments from State Bank of India)
By Kaustubh Kulkarni and Swati Pandey
MUMBAI, Nov 14 India's Kingfisher Airlines has been asked to raise $160 million in equity by creditors and the cash-strapped carrier is considering a proposal to sell property to help pave the way for debt restructuring, a senior banker said on Monday.
"We have asked them to come up with some fresh funds," said Hemant Contractor, managing director of State Bank of India , which leads a consortium of 13 lenders to the airline.
"One thing that is being discussed is selling some of its assets. If they do it, it is good or they would have to find some other means," he told reporters on the sidelines of a World Economic Forum event in Mumbai.
The Economic Times newspaper earlier reported Kingfisher's board, which is meeting on Monday to finalise its quarterly results, would consider proposals to more than halve the company's $1.3 billion debt.
The proposals also include converting loans from its parent company into equity and changing the terms under which it leases aircraft, it said.
If approved, the proposals will help the company receive badly needed bank loans to run its operations.
"We have to be satisfied about viability of Kingfisher. There is no point in restructuring (debt), if the company's operations are not going to be viable," Contractor said, adding State Bank of India had an exposure of about 14 billion rupees ($279 million) to Kingfisher.
Company officials were not available for comment because of the board meeting.
Shares in Kingfisher, controlled by flamboyant liquor baron Vijay Mallya, climbed 7.6 percent in a firm Mumbai market , after plunging as much as 18 percent on Friday to their lowest since launch.
The carrier has become one of the main casualties of high fuel costs and a fierce price war between a handful of airlines which, between them, have ordered hundreds of aircraft for delivery over the next decade in an ambitious bet on the future.
The Centre for Asia Pacific Aviation (CAPA) has forecast a record $2.5 billion to $3 billion loss for Indian airlines for the year ending March 2012, with state-run Air India alone likely to account for more than half of it.
The airline, which has cancelled about 200 flights in the past week, is likely to propose a preferential issue of shares to investors, the newspaper said.
Citing unnamed people familiar with the development, it said Kingfisher would approach banks for up to 5 billion rupees of working capital to buy fuel and pay salaries.
Kingfisher's chief executive, Sanjay Aggarwal, refused to comment on the additional working capital, but confirmed the airline was planning to raise funds by changing the nature of lease agreements and selling real estate, the paper said.
"All this exercise is going to reduce our interest costs that are pinching us a lot right now and reduce debt levels to reasonable limit," the paper quoted him as saying.
Rival Jet Airways (India) Ltd, India's top airline by market share, said on Friday it swung to a net loss of 7.13 billion rupees in the September quarter from a profit of 124 million rupees a year ago, due to a 41 percent jump in fuel prices and losses caused by a depreciating rupee.
Budget carrier SpiceJet posted a net loss of 2.4 billion rupees for July-September, compared with a net profit of 101.1 million a year earlier.
Six weeks ago Kingfisher announced plans to recast its business model by doing away with its low-cost service. On Friday, it said it was dropping unprofitable routes and speeding up a fleet reconfiguration, which would see its daily schedule of flights drop to 300 from 340.
($1=50.1 rupees) (Editing by Ranjit Gangadharan and Matt Driskill)
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