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Kingfisher Shares Rise On Debt-Cut Hopes

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Shares in cash-strapped Kingfisher Airlines rose more than 7 per cent on Monday after reports the cash-strapped carrier would consider proposals, including selling property, to cut its nearly Rs 6513 crore debt by more than half.

Kingfisher's board, which is meeting on Monday to finalise its quarterly results, will also consider converting loans from its parent company into equity and changing the terms under which it leases aircraft, the Economic Times said.

If approved, the proposals will help the company to get badly needed bank loans to run its operations.

Company officials were not immediately available for comment on the report.

Shares in Kingfisher, controlled by flamboyant liquor baron Vijay Mallya, climbed 7.6 per cent Monday, after plunging as much as 18 per cent on Friday to their lowest since launch. At 0506 GMT, shares in Kingfisher were trading up 4.07% at 20.40 rupees in a firm Mumbai market.

Fuel Costs
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 Rs 12,525 crore to Rs 15,030 crore 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 had cancelled about 200 flights in the past week, is likely to propose a preferential issue of shares to investors, to meet a key demand of banks that are insisting its billionaire-founder Mallya bring in more funds, the newspaper said.

It said State Bank of India, the lead lender in a 13-bank consortium, and other banks had asked the carrier's owners to inject Rs 801.60 crore in equity.

"Kingfisher is a valued company, but an airline would need fuel, fleet and finance to run the show. Kingfisher should tell us how it plans to streamline its daily requirements," the paper quoted State Bank Chairman Pratip Chaudhuri as saying.

The newspaper said Kingfisher would approach banks for up to Rs 500 crore of working capital to buy fuel and pay salaries, citing unnamed people familiar with the development.

Kingfisher 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," it quoted him as saying.

Turbulence In The Air
Rival Jet Airways (India) Ltd, India's top airline by market share, said on Friday it swung to a net loss of Rs 713 crore in the September quarter from a profit of Rs 12.4 crore a year ago, due to a 41 per cent jump in fuel prices and losses caused by a depreciating rupee.

Budget carrier SpiceJet posted a net loss of Rs 240 crore for July-September, compared with a net profit of Rs 10.11 crore 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.

Raising Equity
Creditors to Kingfisher Airlines have asked it to raise Rs 799.60 crore equity and would not consider debt restructuring unless the troubled airline has a credible plan in place, managing director of State Bank of India said on Monday.

The state-run bank leads a 13-bank consortium of lenders to Kingfisher.

The airline has a proposal to sell real estate in Mumbai to raise funds, Hemant Contractor told reporters.