* ICICI Bank sells $72 mln debt to SREI Infrastructure
* Bankers to meet Thursday to decide on future plan
* Company talking to pilots to head off strike over pay
(Adds detail, background)
By Anurag Kotoky and Swati Pandey
NEW DELHI/MUMBAI, July 2 Lenders to India's
beleaguered Kingfisher Airlines are losing hope it
will be able to bring in outside investment anytime soon and may
sell assets held against their loans, three bankers said on
Kingfisher, which a year ago was India's No. 2 airline by
domestic market share, is the biggest victim of turbulence in an
aviation industry where the six main carriers face a total debt
load of $20 billion and $2 billion in annual losses.
It is now the smallest carrier by market share in India
where the government has stalled on implementing a proposal to
allow foreign carriers to invest in domestic airlines.
Even if foreign direct investment by an airline was allowed,
there is no guarantee that Kingfisher, controlled by liquor
baron Vijay Mallya and laden with $1.4 billion debt at the end
of March, will be able to find an investor.
Kingfisher, which has slashed its schedule and is flying 16
planes, down from a peak of 64, has been late paying lenders,
staff, and other bills. It last paid salaries for January, a
"(Mallya) keeps telling that FDI is expected, investors are
coming in, but nothing has happened. It has reached a flash
point. We cannot wait anymore," said an executive at a state
bank owed money by Kingfisher who declined to be identified.
Lenders will meet on Thursday to decide on a course of
action. Three bankers involved in the process said they would
consider invoking securities and guarantees against the debt to
recover their money.
State Bank of India, leader of a consortium of
lenders to Kingfisher, would not comment on whether banks were
considering selling shares in the airline and other Mallya
entities pledged with lenders.
"We will discuss as to what exactly we can do to recover our
money. Some banks from the consortium asked us to convene this
meeting in light of the latest developments in the company,"
said V.G. Kannan, who as chief general manager at State Bank of
India, oversees loans from India's biggest bank to Kingfisher.
"We want to take a decision. We cannot wait indefinitely."
On Monday, one of Kingfisher's lenders, ICICI Bank
, said it no longer held any debt in Kingfisher. A fund
managed by SREI Infrastructure Finance had said it
bought about 4 billion rupees ($72 million) of the carrier's
debt from ICICI.
On Monday, local media reported a group of pilots had gone
on strike demanding salary dues, although a Kingfisher spokesman
said top executives were in talks with pilots over salary
payments in a bid to avert a strike.
Kingfisher has been unable to find big investors willing to
pump in fresh capital. A proposal to lift a ban on foreign
carriers taking direct stakes in Indian airlines, potentially
opening a lifeline for Kingfisher, has languished, with some of
India's ruling coalition allies opposing it.
Its shares, down 82 percent in value this year, fell 1.2
percent on the day to 11.95 rupees.
Kingfisher's controlling shareholders, including Mallya,
have pledged 90.11 percent of their holding in the airline with
lenders while controlling shareholders of another UB group
company, United Spirits have pledged 94.42 percent,
according to Bombay Stock Exchange data.
"The company is almost on the verge of collapse now. There
is no movement on the government for allowing FDI in aviation.
We want to recover our money," a senior executive at another of
the airline's lenders told Reuters.
"The only possibility is invoking the guarantees. We only
have UB group shares," the banker said, echoing complaints of
lenders that Mallya has been unwilling to make additional
India has no formal bankruptcy process.
Kingfisher lenders include Bank of Baroda, Bank of
India, Central Bank of India, IDBI Bank
, Punjab National Bank, and UCO Bank
. Most listed their Kingfisher loans as non-performing
in the December quarter.
"There is a bank consortium meeting on July 5 and an agenda
has been circulated. There is no mention of security invocation
and it would be inaccurate and/or misreporting to speculate
otherwise," said Kingfisher spokesman Prakash Mirpuri.
Bankers may make a "harsh" call if they do not see another
way to recover their debt, said Rashesh Shah, an analyst with
ICICI Securities, which has suspended coverage of the stock.
"We do not see how the company would be able to perform
going forward on account of massive debt and lack of funds from
the promoters (or controlling shareholders)," he said.
($1 = 55.8350 Indian rupees)
(Editing by Tony Munroe and Dan Lalor)