Kingfisher to use “idle” safety deposit to reduce debt
13 Oct 2011
New Delhi: Private Indian airline, Kingfisher Airlines Ltd, plans to withdraw a part of a $200 million safety deposit, which it said is lying "idle" with its lessors, to repay some of its debt, the chief financial officer of its parent, the UB Group, said Wednesday.
"We plan to [talk to banks] to issue letters of credit to the lessors to get that money and use it for repaying our debt," Ravi Nedungadi of UB Group told reporters. According to Nedungadi, this money is kept as a safety deposit with lessors for maintenance of planes and other purposes.
It is common industry practise for carriers to mortgage their planes in an arrangement known as sale-leaseback, where a carrier sells an aircraft to a lessor and then leases it back for its operations. The practise allows airlines to free up precious funds that would otherwise remain locked in an asset, such as an aircraft.
Kingfisher indicated it expects to recover between 50-60% of the $200 million lying with its lessors.
Kingfisher's debt stood at Rs6007 crore ($1.22 billion) in January of this year.
