DVB Bank: May repossess two planes from Kingfisher

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Germany's DVB Bank SE said it may repossess two Airbus A320 aircraft from troubled Kingfisher Airlines Ltd if the carrier failed to meet its commitment to the lender in due time.

The cash-strapped Kingfisher, controlled by flamboyant liquor baron Vijay Mallya, is having trouble making interest payments and paying salaries.

"It is a painful situation, it requires a lot of time and work," Bertrand Grabowski, a member of the board at the bank who oversees the aviation business, told Reuters in an interview on Friday.

"We have said to Vijay (Mallya) that we cannot continue like this. If we are not paid on due time we will certainly consider repossession of the aircraft," he added while declining to comment if there is a certain deadline that the bank has set.

Last month, Indian tax officials froze several of Kingfisher's bank accounts for failure to pass on to the government the service taxes that are included in ticket prices. It has until March to pay the outstanding service tax, the Indian finance ministry said.

Grabowski said the amount of loan that DVB has extended to Kingfisher was not significant to its $10 billion aviation portfolio and said the carrier is the only problem that DVB has in its aviation balance sheet.

Kingfisher was not immediately available for comment. On the outlook for this year he said the bank might see slower new loan growth to aviation clients as the risk in the sector is likely to be higher in 2012 due to tough operating environment for the airlines .

DVB is likely to extend only $2-2.5 billion new loans this year compared to $3 billion in 2011, Grabowski said.