5 JAN, 2012, 02.09PM IST, ET NOW
Troubles for cash-strapped Kingfisher Airlinescontinue, as bankers are considering classifying their exposures to the airline as non-performing assets. According to sources close to the development, State Bank of India may have no choice but to term its Rs 1,400 crore exposure to the troubled airline as an NPA.
This would translate into a provisioning requirement of Rs 280 crore for the bank. SBI has the highest exposure to KFA among a consortium of banks including IDBI Bank, Bank of Baroda, Bank of India and ICICI Bank.
According to sources, other banks like Bank of Baroda and Bank of India may also be mulling similar action if the airline misses its repayment deadlines. KFA is learned to have made payments to some of its smaller lenders.
If the account is termed as an NPA, it will be referred to the corporate debt restructuring (CDR) cell, which will have to take a call on the way forward. Further, bankers say they would consider freezing further lending to KFA until the CDR exercise is completed. "We would not lend to the airline unless it is recommended as part of the CDR package, and it is necessary to keep the airline afloat," said a senior official of one of the lenders on the condition of anonymity.
Kingfisher Airlines, though maintains that it will continue to service its loans as required by banks. In an e-mailed response, the KFA spokesperson said, "All KFA accounts with banks will be maintained as standard."
Banks have a total exposure of about Rs 7,000 crore to KFA, of which about Rs 4,000 crore is in the form of term loans. Banks like SBI, ICICI Bank and IDBI Bank have already faced mark-to-market losses to the tune of Rs 2,800 crore after the first debt recast in which part of their debt to the airline was converted to equity, since the KFA stock price has declined consistently since then.
The KFA stock was trading at a low of Rs 20 on the BSE on Thursday morning on reports that the country's aviation regulator - The Directorate General of Civil Aviation (DGCA) - is meeting executives from the airline seeking an explanation on safety concerns. The DGCA feels that KFA's financial stress could have safety implications.
This would translate into a provisioning requirement of Rs 280 crore for the bank. SBI has the highest exposure to KFA among a consortium of banks including IDBI Bank, Bank of Baroda, Bank of India and ICICI Bank.
According to sources, other banks like Bank of Baroda and Bank of India may also be mulling similar action if the airline misses its repayment deadlines. KFA is learned to have made payments to some of its smaller lenders.
If the account is termed as an NPA, it will be referred to the corporate debt restructuring (CDR) cell, which will have to take a call on the way forward. Further, bankers say they would consider freezing further lending to KFA until the CDR exercise is completed. "We would not lend to the airline unless it is recommended as part of the CDR package, and it is necessary to keep the airline afloat," said a senior official of one of the lenders on the condition of anonymity.
Kingfisher Airlines, though maintains that it will continue to service its loans as required by banks. In an e-mailed response, the KFA spokesperson said, "All KFA accounts with banks will be maintained as standard."
Banks have a total exposure of about Rs 7,000 crore to KFA, of which about Rs 4,000 crore is in the form of term loans. Banks like SBI, ICICI Bank and IDBI Bank have already faced mark-to-market losses to the tune of Rs 2,800 crore after the first debt recast in which part of their debt to the airline was converted to equity, since the KFA stock price has declined consistently since then.
The KFA stock was trading at a low of Rs 20 on the BSE on Thursday morning on reports that the country's aviation regulator - The Directorate General of Civil Aviation (DGCA) - is meeting executives from the airline seeking an explanation on safety concerns. The DGCA feels that KFA's financial stress could have safety implications.
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