No cash bailout for Kingfisher just yet

22 Feb 2012

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Lenders to the nose-diving Kingfisher Airlines have not yet reached an agreement to extend further loans to keep the debt-overloaded carrier afloat, says a Reuters report citing three banking sources.

This flatly contradicts reports earlier today that the 13-bank consortium financing the airline had agreed to provide short-term funding to keep the airline afloat. State Bank of India, which leads the consortium, had itself sanctioned a loan of Rs1,200-1,500 crore, the widespread media reports said.

But Reuters, citing banking sources with direct knowledge of the situation, says the consortium comprising 16 lenders overall was still studying a debt-restructuring proposal put forward by the airline last week.

Banks own about a quarter of the carrier through an earlier debt-for-equity swap in November 2011.

There was no official word from either the bankers or Kingfisher on the reports of a bailout, but most observers feel it is likely to happen in some form.

Civil aviation minister Ajit Singh this morning refused to confirm or deny the reports of a bailout, but said, "It's good if banks give loans to the airline ... banks have to decide on loans based on the business plan of the company. If they are satisfied with the business plan, they should proceed with loans."

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