With banks tightening their strings and the financial problem at Kingfisher Airlines (KFA) affecting the reputation of the UB Group and its chairman Vijay Mallya, the Bangalore-based alcoholic beverages conglomerate is learnt to be undertaking a major debt restructuring through sale of assets, according to sources familiar with the developments. FULL COVERAGE:How Kingfisher landed in such a mess
The UB Group refused to comment on this issue.
According to the broad-based restructuring plan, United Breweries Holding (UBH), which has given guarantees for Kingfisher's loans, will cut debt through stake sale in Sahara Force India Formula One team, the Royal Challengers Bangalore IPL team, Mangalore Chemicals and Fertilisers and the real estate development project UB City.
This could fetch $800 million-$1 billion for UBH, which has a total debt of $550 million, said a person having knowledge about the debt recast plan.
After paying off the total debt, UBH will be left with a surplus cash of $250 million-$450 million.
The person said apart from UBH divesting stake, Mallya will sell his personal stake in India's largest beer company United Breweries (UB) and get about $500 million, which would go to KFA.
Mallya owns 23 per cent personal stake in UB and he may dilute it to up to 12 per cent. Heineken International BV, which already holds 37 per cent in UB, could be the buyer though other international beer majors are in the race.
"He needs $200 million to calm down the banks and the rest $300 million could go towards running the airline till the government opens up the Indian aviation sector to foreign airlines to pick up 49 per cent stake," the person added.
Spirits major United Spirits (USL), the UB Group flagship, is also likely to divest 4 per cent stake in UB to raise $100 million so that it could reduce its debt.
"USL would also benefit as debt in UB Holding would go down because shares of USL are pledged with banks and these will be freed. Expect these events to happen in the next few weeks one by one," said Kishor Ostwal, chairman & managing director, CNI Research.Mail Today Exclusive