Kingfisher, the troubled airline owned by Vijay Mallya, fought battles on multiple fronts on Friday. Chairman Mallya, who used to be compared with flamboyant British entrepreneur Richard Branson, met the chairman of India's largest bank to ask for a short-term loan of Rs 400 crore to meet day-to-day expenses, even as leasing companies threatened to repossess 16 aircraft for delay in payment of rentals.
Mallya met Pratip Chaudhuri, chairman of State Bank of India, and top officials of other banks at the SBI headquarters in South Mumbai. Besides the working capital loan, which will be used to meet daily expenses such as salary payments, the chairman asked for letters of credit and guarantees, which would increase the exposure of the banks by Rs 445 crore, to enable the airline to buy fuel, according to people familiar with the matter.
Lenders Crack the Whip
Banks, which own 23% of the debt-laden airline and have lent close to Rs 7,000 crore to the company, want promoters, Mallya and the UB Group, to bring in equity before they lend more. "Before taking a further call on this matter, we first want to see that money (equity of Rs 400 crore) coming in.
Other creditors like oil companies and airport authorities are working out a schedule, and then we will sit with the company to understand how much more money it requires and what are the different sources. All the money need not necessarily come from banks," Chaudhuri had said in Kolkata.
While Mallya was attempting to persuade banks to loosen the purse strings, lawyers representing aircraft-leasing companies were engaged in tough negotiations with representatives of Kingfisher. The lessors have told the airline that they will be forced to seize leased aircraft because of regular defaults in paying rentals, sources with direct knowledge of the matter told ET.
The lessors, which together have 16 aircraft leased out to Kingfisher, are believed to have told the airline that it should pay up in two weeks, increase security deposits and ensure the aircraft are in the same condition as they were at the time of delivery. The average lease rental is $400,000 per aircraft per month.
"Kingfisher is behind schedule on lease rental payments to every leasing company," said an official of one of the leasing companies that have exposure to Kingfisher. He did not wish to be identified because of the sensitivity of the matter. "The most worrying part is that not all of our aircraft assets are in pristine condition," he added.
Banks, which own 23% of the debt-laden airline and have lent close to Rs 7,000 crore to the company, want promoters, Mallya and the UB Group, to bring in equity before they lend more. "Before taking a further call on this matter, we first want to see that money (equity of Rs 400 crore) coming in.
Other creditors like oil companies and airport authorities are working out a schedule, and then we will sit with the company to understand how much more money it requires and what are the different sources. All the money need not necessarily come from banks," Chaudhuri had said in Kolkata.
While Mallya was attempting to persuade banks to loosen the purse strings, lawyers representing aircraft-leasing companies were engaged in tough negotiations with representatives of Kingfisher. The lessors have told the airline that they will be forced to seize leased aircraft because of regular defaults in paying rentals, sources with direct knowledge of the matter told ET.
The lessors, which together have 16 aircraft leased out to Kingfisher, are believed to have told the airline that it should pay up in two weeks, increase security deposits and ensure the aircraft are in the same condition as they were at the time of delivery. The average lease rental is $400,000 per aircraft per month.
"Kingfisher is behind schedule on lease rental payments to every leasing company," said an official of one of the leasing companies that have exposure to Kingfisher. He did not wish to be identified because of the sensitivity of the matter. "The most worrying part is that not all of our aircraft assets are in pristine condition," he added.
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