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Banks turn down Kingfisher Airlines’ Rs 200 crore working loan request

Turning down a request for Rs 200 crore working loan by Kingfisher, the SBI-led lenders consortium Thursday asked SBI Capitals to chalk out a fresh revival plan for the cash-strapped airline in the next 2-3 weeks. Kingfisher Chairman Vijay Mallya made a presentation in a meeting with lenders at Bangalore headquarters this afternoon, the first such meeting after the government's policy decision allowing foreign airlines to invest in domestic carriers. According to lenders, Mallya did not offer any concrete revival plan as he could not commit on equity infusion by promoters.

An official from a public sector bank said the lenders turned down a request from Mallya for an immediate working capital loan of Rs 200 crore. Since this January, the airline has not been servicing its Rs 7,000 crore bank debt. The official said that the lenders have asked SBI Capitals to make a new revival plan, the third one, for the airline in the next two-three weeks. Though the company suggested a second debt restructuring, nothing was finalised, a source said. When asked whether banks are open to a second CDR in two years, the source said that will depend on the SBI Caps proposal.

The meeting comes amidst talks of the airline talking to prospective foreign airlines to offload its stake. On 3 September in Mumbai, the bankers had demanded that Mallya himself should make the revival plan and Thursday?s meeting is the result of that. This is the third time that SBI Caps has been asked to prepare a rejig exercise for the airline. In 2010, it had made a debt recast plan for the airline and in November that year, its Rs 6,500 crore worth loan was recast.


Kingfisher Airlines continues to default on its service tax outstandings, amounting of over Rs 60 crore, and the government move to allow FDI policy in civil aviation sector offers the 'only ray of hope' to recover the dues from the debt-ridden airline, according to a top tax official. Kingfisher has said it is in talks with foreign carriers for bringing in FDI, a move that is expected to help it in overcoming financial troubles.

'Kingfisher Airlines continues to be a defaulter and has an outstanding of over Rs 60 crore. It is defaulting on the weekly payments and most of its bank accounts are frozen,' Mumbai Service Tax Commissioner Sushil Solanki said. As the department has frozen almost all the accounts of the ailing airline, which is forced to operate only a skeletal schedule due to drop in services, it is very difficult for the carrier to pay its dues as cash flows are down to a trickle. Kingfisher has not been depositing service tax collected from passengers with the department since November last on a regular basis and instead has been diverting it for other purposes on a regular basis.
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