Kingfisher board okays Rs 2,000-cr rights issue

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In a bid to trim its huge debt of Rs 6,000 crore, the board of the cash-strapped private carrier Kingfisher Airline has approved a rights issue to mobilise up to Rs 2,000 crore, but without setting a time-frame.

The debt-laden airline, which had reported a net loss of Rs 263 crore on a revenue of Rs 1,882 crore in the April-June quarter, has been trying to raise funds through a global depository receipts (GDR) issue of USD 250-350 million, for quite some time now.

In a filing to the Bombay Stock Exchange, Kingfisher said its board of directors has approved the "issue of equity capital on rights basis (for) an amount not exceeding Rs 2,000 crore".

The airline board had met yesterday and took the decision. But when contacted the airline spokesperson refused to comment saying, "as a policy the company doesn't comment on its board decisions."

Further, the board also modified the terms and conditions of the optionally convertible debentures (OCDs) that were issued by the company on January 3, 2011.

As per the new terms, the company said, an OCD holder will be allowed to convert the debentures into shares at a price to be determined by the board.

The company had issued about Rs 700 crore of OCDs to certain entities in January.

However, the market reacted negatively to the announcement, and the stock skidded nearly seven percent to Rs 23.30 on the Bombay Stock Exchange in the afternoon trade, on a day when the main index Sensex shed over 310 points. The airline stock has fallen over 64 percent so far this year.

The airline had earlier issued debentures worth over Rs 700 crore to three firms acting in concert with the founders and the debentures would be redeemed prior to the rights issue, the statement said.

"In the event the rights issue has not occurred during the relevant period, the OCD shall continue in accordance with their original terms, and may be redeemed at the end of 18 months from allotment," the airline said.

Earlier, the second largest airline by market share, had restructured its debt by converting almost Rs 1,200 crore of loans into equity and its current debt stands at about Rs 6,000 crore.

Under a CDR proposal approved by central bank, the airline had cut its debt through a debt revamp process in which the airline issued 116.3 million shares to a consortium of 13 banks led by State Bank of India and ICICI Bank, after conversion of compulsory convertible preference shares at Rs 64.48 a share.

The airline had recast its debt by converting almost Rs 1,200 crore of loans into equity and its debt stands at about Rs 6,000 crore as of FY11.

Rising fuel prices have been cringing airlines across the globe. Competition does not allow airlines to increase the fares in line with the rising fuel prices and even low-cost carriers have reported losses during the first quarter of this fiscal.

Brent crude is trading over USD 110 a barrel now, which though is lower than high of USD 127 a barrel it had hit earlier this year.