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India's Kingfisher shares dive on bank loan recall plan

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(Globalpost/GlobalPost)

Shares of India's debt-laden Kingfisher Airlines plunged on Wednesday after banks said they would start recalling loans worth $1.5 billion, which analysts said spelled the end for the carrier.

The firm, controlled by Indian liquor baron Vijay Mallya, slid five percent -- its daily limit -- before edging clawing back some losses to trade down 4.58 percent at 10.62 rupees in mid-afternoon.

"The banks' decision to start the recovery process means the end of the road for Kingfisher" if they carry it through, Kapil Kaul, regional head of leading aviation consultancy CAPA, told AFP.

The creditor banks' announcement late Tuesday that they would begin recalling the outstanding loans paves the way for the sale of Kingfisher assets held as collateral.

"We have decided to recall (initiating the recovery process) the loans given to Kingfisher Airlines," Shymal Acharya, a deputy managing director of state-run State Bank of India, which heads the consortium of bank lenders, said.

A spokesman for Bangalore-based Kingfisher he could not immediately comment on the banks' decision.

"I am not able to wager a guess (when the airline will be able to comment)," Prakash Mirpuri, an airline vice president, told AFP.

The carrier, whose planes have been grounded since October, has never made a profit since it began flying in 2005, while it owes vast sums to banks, airports, fuel suppliers and its staff.

Kingfisher has a number of real estate assets that it put up as collateral against its loans, including its office in financial hub Mumbai, but analysts said most of its planes were on lease and lessors have taken them back.

"It is over for Kingfisher -- it was over one year back," Sharan Lillaney, aviation analyst at Mumbai's Angel Broking, told AFP.

The airline, once India's second-biggest carrier and known for its red-carpet service, posted a net loss of 7.55 billion rupees ($142 million) in the three months to December.

"We had given them (the airline) many chances to come back with a specific positive action plan about their restart plans. But they could not come up with any concrete action plan," Acharya told reporters.

"There is no reason for us to give further time to the company," he added.

Kingfisher, which made costly acquisitions as it sought to grow its business, was the worst-hit of India's airlines last year, as the industry was plagued by high jet fuel costs, a price war and shabby airport infrastructure.

Mallya, who dubs himself "the king of good times," has been desperately scouting for a foreign airline or other investors to put money into Kingfisher to get it flying again.

But analysts have expressed doubts over whether any investor would be interested, given a debt load that is estimated to total $2.5 billion by CAPA.

Mallya is expected to get some funds from the $2 billion sale of a majority stake in India's United Spirits but the deal still must clear regulatory hurdles.

The tycoon in the past has insisted he will not use his other businesses to "cross-subsidise" the airline.

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http://www.globalpost.com/dispatch/news/afp/130213/indias-kingfisher-shares-dive-bank-loan-recall-plan-0