By 19 January, 2012

Debt-laden carrier Kingfisher Airlines said it is in talks with Hong Kong-based distressed debt company SC Lowy Financial for a possible investment, throwing a potential lifeline for the cash-strapped airline.

"We are in discussion with SC Lowy and others. We cannot comment further at this time," a spokesman for Kingfisher said on Thursday.

He, did not, however specify, whether any investment would be in the form of debt or equity infusion.

Earlier Thursday, the Economic Times reported that Lowy may invest about $280 million in the Vijay Mallya-owned carrier and a deal may happen by the end of the month.

A spokesman for SC Lowy declined to comment on the report.

Lenders like State Bank of India and ICICI Bank, which already have stakes in Kingfisher via a debt recast, are pushing for equity infusion by a third party, before they provide more loans to the carrier.

SC Lowy, founded by two ex-Deutsche Bank (DBKGn.DE) veterans in 2009, is a trading and investment firm, focused on investing in illiquid assets.

SC Lowy Chief Executive Officer Michel Lowy and Chief Investment Officer Soo Cheon Lee led Deutsche Bank's Asian distressed products group until March 2009, when they broke away to found the company.

Kingfisher shares rose as much as 4 per cent in early trade, but pared all gains to trade flat at Rs 25.35 by 10.45 am. They traded at double the current price a year back.

Sharan Lillaney, an aviation analyst with Angel Broking, said that even if a deal with Lowy goes through, it may not be a big positive for the company.

If it is a debt infusion, it will bring in more debt to the company's already stressed balance sheet, he said.

"Also at what price will you sell? The valuations are very low...How will the deal go through I don't know," Lillaney said.

India's airline companies, reeling under a massive debt load of about $20 billion, have suffered badly in the recent past, as high fuel prices, lack of funding and stiff competition have put question marks on their prospects.

Kingfisher, has been forced to cancel flights and is having trouble making interest payments and paying salaries to employees.

Creditor State Bank of India, the country's biggest lender, said this week it was difficult to lend more to Kingfisher. SBI has said it considered loans to the cash-strapped private airline to be non-performing.

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