State Bank of India and ICICI Bank have together picked up close to 11 per cent stake in debt-trapped Kingfisher Airlines as part of debt recast process.
SBI was alloted 2.8 crore equity shares on preferential basis on account of conversion of compulsorily convertible preference shares under corporate debt restructuring, the bank informed the Bombay Stock Exchange.
By virtue of the allotment of shares, the SBI stake in the airline was 5.67 per cent and the value of the holding was Rs 182.25 crore (Rs 1.82 billion).
At the same time, another lender ICICI Bank was also allotted 2.6 crore shares against the loan it had given to the airline.
With the allotment the bank's equity holding in the airline stands at 5.3 per cent worth Rs 169.9 crore in value terms.
In aggregate, the holding of both the banks in the airline was about 10.97 per cent and the allotment of shares to the banks was done on March 31, 2011.
This cashless transaction is a part of corporate debt restructuring agreed by banks and the airline company.
Even other large lenders like IDBI Bank, Bank of Baroda and Punjab National Bank have also got some stake in the airline company owing to conversion of a portion of debt.
Under the plan, Kingfisher, controlled by United Breweries Holdings, had agreed to convert Rs 1,355 crore worth loan into shares, besides a plan to convert the founders' debt of up to Rs 648 crore into share capital.
The airline had mandated SBI Caps for the debt restructuring.
With this conversion, the lenders together now hold around about 24 per cent stake in the company.
With the allotment, the paid-up equity capital of the company has increased to Rs 497 crore (Rs 4.97 billion) from Rs 265 crore (Rs 2.65 billion).
This move by the lenders follows a decision taken during end-November 2010 on a debt recast package, effected after a one-time relaxation in restructuring guidelines sanctioned by the Reserve Bank of India.
A consortium of 13 banks led by SBI had given debt to UB Group's Kingfisher Airlines which was restructured as the airline company found difficulty in payment on schedule.
Shares of Kingfisher Airlines were trading at 47.6, up 3.59 per cent on the Bombay Stock Exchange.
Banks converted part of loans at Rs 64.48 per share. Kingfisher had earlier said the price was arrived in accordance with the pricing guidelines prescribed under the Securities and Exchange Board of India, which is the average of the past six months' price, 30 days prior to the relevant conversion date.
Following the ripple effect of the September 2008 financial meltdown, the domestic aviation industry which was flying high hit an air pocket, as the global prices decelerated the domestic economic growth amidst sky-high crude prices.
Following this, the Reserve Bank had cleared a debt restructuring proposal for the sector in September 2010.