India's Kingfisher Air to raise $356m in share sales

Kingfisher Airlines Ltd, India’s second-biggest carrier, plans to raise $356 million selling shares to pare debt and help fund expansion.

The airline seeks to collect as much as $250m from a sale of global depositary receipts and 5 billion rupees ($106m) from a local equity offering, according to an e-mailed statement from the Mumbai-based company on Tuesday. The plan should be completed in three to four months, it said.

“Raising funds will increase confidence in the company,” said Shumukh Ghosh, a Mumbai-based analyst at Naman Securities & Finance Pvt in Mumbai.

Kingfisher, owned by India’s biggest brewer, is restructuring after the global recession and a slowdown in the local economy forced it to slash capacity. Bigger Jet Airways (India) Ltd is also seeking to raise funds as travel demand rebounds in the world’s second-most populous country.

Kingfisher fell one per cent to 59.35 rupees in Mumbai trading on Tuesday. The shares have lost 6.1 per cent this year, compared with the benchmark Sensex Index’s 2.9 per cent gain.

United Breweries Holdings Ltd, the airline’s parent, also decided to convert loans of about 6.5bn rupees extended to Kingfisher into preference shares, according to the statement.

The Reserve Bank of India, the central bank, in July asked 13 of the nation’s top banks to formulate a common policy to restructure debt at airlines, a newspaper reported, citing minutes of a meeting. The central bank wanted banks to form consortia for restructuring debt rather than provide on- time relief to individual companies, it said.

The airline has tasked SBI Capital Markets Ltd. with the financial restructuring, according to United Breweries’ website. The company earlier appointed Citigroup Inc, Morgan Stanley, CLSA and UBS AG as bankers for a global depositary receipt sale of about $200m.

The carrier, named after a United Breweries beer brand, began operations in May 2005 and merged with Deccan Aviation Ltd in April 2008. Its fleet of 66 aircraft connects 61 cities in India and eight cities overseas, according to United Breweries’ website.

Jet Airways, which has 135bn rupees of debt, plans to raise $400m through institutional placement and will use the funds to repay the loans, company Vice President M Shivkumar said on August 27.

Kingfisher reduced its first-quarter loss to 1.87bn rupees from 2.37bn rupees a year earlier. It reduced capacity by 20 per cent on domestic routes and 6 percent on international routes, according to a July investor presentation on its website.

The airline, which aims to join the OneWorld alliance next year, has also reduced expatriate pilots and the number of leased planes, according to the same presentation.