The government defended state-run banks exposure to debt-ridden Kingfisher Airlines,stating that loans worth Rs 6,419 crore to the debt-ridden air carrier were not over-valued. It also ruled out a second round of debt restructuring as mooted by the airline to reduce its debt burden.
Responding to a query in the Rajya Sabha on whether banks had bought the cash-strapped airlines shares for 260 per cent more than the market prices,Minister of State for Finance Namo Narain Meena said,There was no overvaluation to accommodate the airline.
Meena said public sector banks have an exposure of Rs 5,792.66 crore to the airline by way of fund-based limits and non-fund based limits and Rs 1,109.20 crore through investment in cumulative redeemable preference shares (CRPS) and non-convertible CRPS (NCRPS).
As per the Master Debt Recast Arrangement (MRDA),a portion of the debt was carved out and issued as CRPS,which was subsequently converted into equity shares of Kingfisher Airlines at a price of Rs 64.48 per share on March 31,2011,as against the prevailing market price of Rs 39.90 per share. Public sector banks were allotted 11,63,30,639 shares in the company on conversion on March 31.
The total investment by banks in equity shares was Rs 750.10 crore. The market value of equity shares held by banks in Kingfisher Airlines as on December 7,2011,is valued at Rs 298.39 crore.
Meena said that the State Bank of India,the lead banker to Kingfisher,has said that banks are not considering carrying out a second round of restructuring.