India's State Bank of India has decided on a INR16.5 billion rupee (USD$334.62 million) loan package to help troubled Kingfisher Airlines overcome a cash crunch, the Hindustan Times newspaper reported on Wednesday.
The newspaper quoted an unidentified source as saying the state-controlled bank had decided to extend a new line of credit, that included INR7 billion rupees in short-term working capital and INR5 billion in bank guarantees.
It has also decided to extend the tenure of current loans to the airline worth about INR2.5 million - INR3 billion rupees that would have been due next year, the newspaper said.
State Bank or another government bank, Punjab National Bank, could offer bank guarantees of INR1.6 million - INR2 billion rupees to tax authorities, it said.
The airline has become one of the main casualties of high fuel costs and a fierce price war between a handful of budget carriers which, between them, have ordered hundreds of aircraft for delivery over the next decade in an ambitious bet on the future.
Kingfisher shares dropped nearly 20 percent in intra-day trade on Tuesday but recovered to close 0.4 percent up as rumours of the bank bailout spread. India's aviation regulator said the airline had given an assurance that bank funding was on the way.
Gravity always wins!
Looks like the Kingfisher loan is a dream
State Bank of India, the country's top lender, has not extended further loans to debt-crippled Kingfisher Airlines, a bank official said, denying reports that the state-owned creditor was close to offering a lifeline.
Several newspapers reported that State Bank of India (SBI) would throw a lifeline to Kingfisher, which is majority owned by drinks baron Vijay Mallya, giving figures ranging from INR2 billion to INR16.5 billion rupees (USD$40 million - USD$335 million).
"We have not given any fresh loans to Kingfisher," said SBI's deputy managing director R. Venkatachalam, who is responsible for managing the Kingfisher loan account. "All media reports are baseless and untrue."
The bank is also not considering giving any fresh loans to the carrier as of now, he said late on Wednesday.
Desperately strapped for cash, Kingfisher stands on the brink of collapse after nearly a week of flight cancellations and the resignation of dozens of its pilots.
Banking sources, with direct knowledge of the situation, earlier said the airline's consortium of 16 lenders, which includes SBI, were still studying a debt-restructuring proposal put forward last week.
Banks own about a quarter of the carrier through an earlier debt-for-equity swap.
Shares in SBI ended down 8.1 percent, their biggest single-day fall in more than two-and-a-half years, on concerns it was extending more credit to the beleaguered carrier.
India's second-largest airline until this year, Kingfisher has not turned a profit since it was founded in 2005 and is carrying a debt burden of at least USD$1.3 billion.
Its revenue has been in decline since the end of last year. Staff are not being paid and tax bills remain outstanding. A tax official said the airline's arrears for financial year 2011/12 were around INR400 million rupees (USD$8.1 million).