Banana banking: with reference to Kingfisher Airlines.

-Rahul Ranjan, 12210

Action plan to be taken by the lenders:

1. Lenders should seek approval from their respective management to take legal action against KFA. 2. Take KFA to debt recovery tribunal (DRT) and exercise the pledge of the Kingfisher Villa in Goa and the Kingfisher House in Mumbai, which may fetch Rs 300 crore. 3. Invoke the personal guarantee offered by promoter Vijay Mallya. Out of the total debt of 7000 crores, 500 crores can be fetched from the pledged shares of UB group and 500 crores from sale of helicopters, real estate, the Bombay house, and the Goa property. 4. Although the total debt is 7000 crores, and only 1000 crores can be recovered from pledged securities and personal guarantee, it is what is done with the guarantor that is important. 5. There are set of shares which are not pledged, lenders should try to get even those share in to personal guarantee. If these shares are sold to Diageo then cash could be possibly available for the lenders. 6. The option 5 should be acted upon before much time elapses because the property can be moved and rights can be transferred to third party. 7. Give a SARFAESI Notice and move to DRT. 8. The DRT procedure can take minimum of 9 to 18 months. Even after invoking collateral and personal guarantee, the principal amount cannot be recovered in total. One of the last options would be to file for insolvency of Mr. Vijay Mallya. 9. Unlike company which defaults in its payment can be asked for winding up, but it is tough to force guarantor into insolvency in case of personal guarantee and nonpayment of debt. 10. To enforce Mallya into insolvency, the lenders have to prove that Mr. Mallya has deliberately shifted assets away to avoid paying to the creditors, which are pretty stiff conditions to satisfy and can take minimum of 10 years in Indian courts.