Vijay Mallya, the chairman of grounded carrier Kingfisher Airlines, has offered banks to pay the principal amount that he owes but not the interest component and he has approached the bankers seeking a meeting, which may take place during the next few days.
The principal amount that KFA owes to the banks is between Rs 4,500 crore to Rs 5,000 crore, a banker, who is familiar with the deal said on condition of anonymity.
However, bankers are in no mood to settle for less and they may ask for the interest component also, at least a significant a part of it. The interest component is upward of Rs 2,000 crore and public sector banks have kept the Finance Ministry in the loop regarding the issue.
A Kingfisher Airlines spokesperson declined comment.
According to a public notice issued by SBI Caps recently, the amount due by the troubled airline to the consortium of banks lead by SBI, is about Rs 6,963 crore, as on 31 January, 2014, excluding interest rate which will be levied at 15.5 per cent per annum. SBI Caps – the merchant banking arm of State Bank of India – the country’s largest lender – has put KFA’s asset that are in Mumbai Chhatrapati Shivaji International Airport, for auctioning.
“I am focussing on settling Kingfisher affairs with banks. That's what my current focus is on,” Mr Mallya said at the USL annual general meeting today, news agency PTI reported from Bangalore.
A few banks like State Bank of India and United Bank of India have identified Mr Mallya as wilful defaulter which will mean he or the company where he is a board member cannot access funds from banks. Kingfisher Airline stopped flying since October 2012, and the airline's permit was suspended by the Directorate General of Civil Aviation in the same month.
United Breweries (Holdings) and Mr. Mallya are the guarantors to the loans taken by Kingfisher Airlines, according to the SBI Caps notice.
The loans to Kingfisher Airlines were restructured in 2011 and banks had taken a beating after a 10 per cent of the debt was converted into equity. Banks had bought shares of Kingfisher at a 61 per cent premium. Despite the restructuring, the airline company failed to pay its dues. Most of the banks have classified the loans given to Kingfisher as non-performing. Since, a large part of the loan was unsecured, so banks have to make 100 per cent provisioning for the exposure.
In October, the Central Bureau of Investigation had raided the UB group's office and Mallya's residence in Goa and Bengaluru, after the agency filed a first information report against Mr Mallya, and some bank officials.
The banking regulators have tightened norms to tackle wilful default while the government is formulating a bankruptcy code to expedite recovery. A draft bankruptcy code was recently put out in public domain. The government has said it aim to table the Bankruptcy Bill in the winter session of the parliament
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