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India Lenders to Claim $1.6 Billion From Kingfisher Airlines

Indian lenders to grounded carrier Kingfisher Airlines Ltd. will start proceedings to recover as much as 85 billion rupees ($1.6 billion) of dues after founder Vijay Mallya failed to pay the debt, the biggest creditor said.

“We have decided to start recovery process on the loans to Kingfisher,” Shyamal Acharya, deputy managing director of State Bank of India, said in an interview to Bloomberg TV India today. “Banks have already given Mallya enough time to repay.”

State Bank of India has set aside the 15 billion rupees it lent to Kingfisher following Mallya’s inability to repay the borrowings. Liquor tycoon Mallya in November 2011 pledged to raise money through new loans, a rights offer and property sales to pay debt and avoid grounding of the carrier. Kingfisher stopped operations from Oct. 1 last year.

The options for the lender “include going to the Debt Recovery Tribunal and enforcing pledge of movables,” said Rabindra Junjhunwala, Mumbai-based partner at law firm Khaitan & Co. The law also “gives certain classes of secured creditors additional remedies such as attachment and sale of the secured assets of a borrower, and taking over management of defaulting borrower.”

Kingfisher fell 5 percent to 10.55 rupees at the close in Mumbai trading. The shares have plummeted 61 percent in the past year. United Breweries Holdings Ltd., which owns stakes in the group’s six companies, plunged 10 percent to 70.20 rupees, the stock’s biggest decline since October 2008.

McDowell Holdings Ltd. fell 8.2 percent to 58.95 rupees. Mangalore Chemicals & Fertilizers Ltd. advanced 4.9 percent, while United Spirits Ltd., which is being acquired by Diageo Plc, dropped 4.9 percent to 1,861.85 rupees.

No Operations

Prakash Mirpuri, spokesman for Kingfisher, declined to comment on the lenders move to start the recovery of dues.

“Under the current laws in India it could take lenders as much as two years to recover the loan to Kingfisher,” Vishal Narnolia, Mumbai-based banking analyst at SMC Global Securities Ltd., said. “The recovery will boost banks’ profits as many of them have already set aside a bad loan buffer to cover it.”

The airline reported net loss widened to 7.55 billion rupees in the three months ended Dec. 31, from 4.4 billion rupees a year earlier. The carrier didn’t have any sales from operations, compared with 13.7 billion rupees a year earlier.

Kingfisher also defaulted on payments to fuel suppliers and airports as losses widened amid rising fuel costs and price competition. Kingfisher, which was No. 2 in India by market share in 2011, had net debt of 85 billion rupees, according to data compiled by Bloomberg.

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