The board of Kingfisher Airlines on Friday approved converting lenders' debt of up to Rs 1,355 crore (Rs 13.55 billion) and the promoter-founders' debt of Rs 648 crore (Rs 6.48 billion) into share capital. Under the debt restructuring package, Kingfisher will sell 5.75 million shares to a consortium of lenders. It will also sell 7.8 million of the 7.5 per cent convertible shares.
The company will reschedule the debt repayment to over nine years. The board meeting follows a one-time relaxation in restructuring guidelines sanctioned by the Reserve Bank of India.
The airline has a debt of over Rs 6,000 crore (Rs 60 billion) on its books and the debt restructuring will help it cut interest costs. UB Group Chairman Vijay Mallya had recently said there will be an interest rate reduction to an average of 11 per cent in the process.
As Indian air carriers are awaiting a debt restructuring process ahead of their respective fund raising programmes, industry experts said even a marginal relaxation like resetting the rate of interest and extending the moratorium period will be beneficial to the industry, saddled with a collective debt of over Rs 60,000 crore (Rs 600 billion).
The airline plans to raise funds of about $1 billion, including a $250-million GDR issue, that would be considered as soon as the debt restructuring exercise is finalised. Shares of Kingfisher dropped by 1.61 per cent to settle at Rs 70.35.
