Kingfisher Airlines asset sale: Bankers have mountain to climb

Sarfaesi notice issued to airline may end on July 3

It may be a few more months before bankers get to sell off properties pledged to them by Kingfisher Airlines (KFA),even as the 60-day notice period under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act draws to an end.

Banks had served a Sarfaesi notice to the beleaguered airliner in the first week of May,to take control the immovable properties pledged with them. The notice period is likely to end on July 3,according to TV reports. The pledged items include real estate properties in Mumbai and Goa.

“Once the 60-day notice period is over,banks can place a seal notice on these properties and,then,they can choose to approach the district magistrate for physical possession of the property,” said a banker close to the development.

Once the district magistrate gives its approval,bankers can put out advertisements in national publications inviting bids for sale of these properties,within a 30-day period.

Getting the district magistrate’s approval can be tricky because here is where the borrower’s political connections come into play. Sometimes,it can take up to six months before banks can get an approval,” the banker said.

If banks were to go ahead with the sale process without getting full possession of the properties,the price quoted by bidders can be 30-40% less than in a fully possessed property. Thus,getting the magistrate’s approval is crucial for lenders to recover more,bankers added.

Lenders to KFA have already stated that the battle to recover their dues might prove to be a long drawn one. The 14-lender consortium has an exposure of close to R7,000 crore towards the debt-ridden airliner. State Bank of India,which is the lead in the consortium,has an exposure of close to R1,600 crore. Other lenders in the consortium include Bank of India,Bank of Baroda,IDBI Bank and Indian Overseas Bank.

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Apart from R680 crore recovered from the sale of shares of United Spirits,Mangalore Chemicals & Fertilisers and KFA,which were pledged to it,the consortium hasn’t been able to encash any other form of collateral,so far.

The consortium has also advised Srei Infrastructure not to sell the shares of United Spirits it holds at less than the current market price.