A global debt fund managed by Srei
Infrastructure has bought ICICI Bank’s Rs 430-crore loan to ailing Kingfisher
Airlines.
India Global Competitive Fund
(IGCF), which bought ICICI Bank’s entire outstanding debt exposure, is managed
by Srei subsidiary Srei Venture Capital.
The arrangement works like this:
suppose, ICICI Bank had given Kingfisher a loan of Rs 100 at an annual interest
rate of 8 per cent or Rs 8 per annum.
If India Global buys the loan for, say,
Rs 80, the fund will continue to earn an interest of Rs 8 from Kingfisher. So,
the yield on the investment by India Global increases to 10 per cent compared
with 8 per cent enjoyed by ICICI Bank.
In case Kingfisher fails to repay
the loan, India Global can sell the collateral kept by Kingfisher to secure the
loan from ICICI Bank. If the value of the underlying collateral is worth Rs
100, India Global stands to make a gain of 25 per cent on its investment of Rs
80 by selling the securities for Rs 100.
