Investors Staring Down Black Hole If Kingfisher Fails


MUMBAI – If the liquor baron, Vijay Mallya’s Kingfisher Airlines fails, lenders owed $1.4 billion may end up with a meager stake in his spirit business. Through interviews with bankers, lawyers, and others in the financial industry, information provided by the company and publicly available data, Reuters has observed that much of Mallya’s empire is at risk. While Mallya team clears out the speculations over it.

According to Thomson Reuters data, as of March 2011, UBHL had a market value of just under $100 million and had liabilities of about $2.58 billion, more than three times its assets, when its biggest asset was Kingfisher, which is worth less now.

The first to be affected would be the $16 million worth beachfront villa in Goa, where Mallya used to throw parties and shoot his Kingfisher swimsuit calendar, owned by his UB Holdings (UBHL). It was pledged as collateral to State Bank of India (SBI). The UB Group now wants to trade the villa for another asset. And SBI is resisting the decision.

Banks are putting pressure on Mallya by planning to sell the Bombay House office building near Mumbai’s airport, worth roughly $9 million. “Selling off a brand, valuing it, is not an exercise that has happened before so we want to start with something that we understand first. We have already started the process of liquidating the securities, the tangible ones – Goa villa and Bombay House. That will begin to hurt Mallya,” said a senior executive with one of Kingfisher’s lenders.

There were speculations that the company’s British rival Diageo is up to acquire United Spirits while Heineken is up to takeover Mallya’s stake in United Breweries, the which does not have direct exposure to the airlines or its creditors.