Kingfisher shares down on debt plans

Kingfisher shares down on debt plans

Shares in Kingfisher Airlines sunk today following a decision by the board to seek up to $1 billion to pare high debt.

Kingfisher – the second largest private airline in India – said in a statement it would raise up to US$250 million through Global Depository Receipts (GDRs).

The carrier – which operates a fleet of 66 aircraft - plans to raise five $106 million through a domestic share offering in the next four months.

In addition, United Breweries, which controls the airline, will convert loans of around 6.5 billion rupees to Kingfisher into preference shares.

The announcements follow an enabling resolution approved by the board to issue fresh capital, including through preference shares, equity shares and GDRs.

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Turnaround

Along with the majority of global carriers, Kingfisher has remained in the red in 2010 - reporting a net loss of 1.87 billion rupees for the June quarter. However, the airline is expecting a reversal of fortunes over the coming half year.

However, the Centre for Asia Pacific Aviation (CAPA) has warned the biggest obstacle to this turnaround is the airlines US$1.5 billion debt mountain.

Interest payments presently total a fifth of all costs.

The airline has employed Citibank, Morgan Stanley, CLSA and UBS to oversee the restructuring.

Shares in the carrier on the Bombay Stock Exchange ended at Rs59.35, down 0.84 per cent from the previous close amid a weak broader market.