Lenders take possession of Kingfisher Airlines’ headquarters

The group of 14 lenders led by State Bank of India (SBI) expects to recover 
at least Rs1,000 crore as it starts taking possession of buildings, helicopters 
and other fixed assets of the grounded airline, the bankers said. 
Photo: Abhijit Bhatlekar/Mint

live Mint: Mon, Aug 12 2013. 01 03 PM IST

Lenders have taken over ‘Kingfisher House’ as part of the second phase of recovering loans from the airline

Aconsortium of banks has taken possession of Kingfisher Airlines Ltd’s headquarters at Vile Parle in Mumbai as a part of its efforts at recovering loans from the grounded airline.

Two bankers confirmed that the lenders have taken over “Kingfisher House” near Mumbai’s domestic airport as part of the second phase of recovering loans from the Vijay Mallya-promoted airline and will start proceedings to sell the office

They did not want to be identified.

A senior airline executive, requesting anonymity, said the banks on Saturday had send “a caution notice” to Kingfisher Airlines, barring transactions on the office, adding that “they have not restricted entry to staffers or sealed the property.”

The group of 14 lenders led by State Bank of India (SBI) expects to recover at least Rs.1,000 crore as it starts taking possession of buildings, helicopters and other fixed assets of the grounded airline, the bankers said.

The consortium collected Rs.550-600 crore in the first phase by selling pledged shares of associate companies of Kingfisher Airlines’ parent UB Group.

Kingfisher’s operating licence was suspended in October by the Directorate General of Civil Aviation following a strike by the airline’s employees.

The permit has since expired, although it can be renewed within two years.

The bankers had already filed a claim on 3 May under the Sarfaesi (Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest) Act to recover dues.

Under the claim, the bankers had given 60 days’ notice to airline and it had expired on 1 July.

The banks had started procedures for taking over properties and other assets in the first week of July in consultation with the Debt Recovery Tribunal (DRT).

This marks the last round of a bitter battle in one of corporate India’s most high-profile loan default cases. The lenders will be selling the airline’s properties in Mumbai and Goa, two helicopters, other fixed assets and shares of UB Group companies.

SBI has the maximum exposure to Kingfisher in the consortium at Rs.1,600 crore, followed by Punjab National Bank (Rs.800 crore), IDBI Bank Ltd (Rs.800 crore), Bank of India (Rs.650 crore), Bank of Baroda(Rs.550 crore), United Bank of India (Rs.430 crore), Central Bank of India (Rs.410 crore), UCO Bank (Rs.320 crore), Corporation Bank (Rs.310 crore), State Bank of Mysore, an SBI associate bank (Rs.150 crore), Indian Overseas Bank (Rs.140 crore), Federal Bank Ltd (Rs.90 crore), Punjab and Sind Bank (Rs.60 crore) and Axis Bank Ltd (Rs.50 crore).

Their overall exposure is Rs.6,360 crore, which increases to about Rs.7,000 crore adding unapplied interest.

There are three lenders outside the consortium—Srei Infrastructure Finance Ltd, Jammu and Kashmir Bank Ltd and Oriental Bank of Commerce.

The lenders have also asked Srei Infrastructure Finance not to go through the legal processes but to sell Kingfisher Airlines shares pledged with them in the open market.

Srei bought the loan from ICICI Bank Ltd and, as per the arrangement, if the value of the shares that it took as collateral exceeds its exposure, the consortium will get the money.

A Kingfisher Airlines spokesperson declined comments.

Under the Sarfaesi Act, only assets that are mortgaged with banks can be recovered, while DRT allows taking possession of any asset held by a defaulting borrower, irrespective of whether these are pledged with banks or not. The DRT process, however, is a long one.

While recovering through court cases, without taking help of Sarfaesi or DRT, if a borrower has to contest a claim by a banker, the borrower has to deposit 75% of the contested amount upfront with the court.

However, courts frequently waive this requirement.

On Saturday, Kingfisher Airlines chief executive officer Sanjay Aggarwal held a meeting with its senior management fuelling the rumours of restarting of the airline.

“It was a routine meeting with management about maintaining air worthiness and other engineering standards as per Director General of Civil Aviation’s rules. We have not discussed any restart plans on Saturday,” said another Kingfisher Airlines’ executive, who also requested anonymity.