SBI sends Kingfisher legal notice to recover its loans

Written by feBureau | Mumbai | Updated: Apr 10 2013, 07:25am hrs
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 airlines 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