Vijay Mallya debt default costs Diageo $135m

Vijay Mallya, billionaire chairman of United Spirits, has cost Diageo US$135 million by defaulting a second time on a debt repayment to Standard Chartered Bank, according to reports.

Vijay Mallya has reportedly defaulted on a US$135m loan repayment for a second time

In May last year, following Mallya’s first default, Diageo requested an extension on the repayment deadline in exchange for Diageo depositing US$135m in an escrow account with the bank.

According to Daily News & Analysis, Mallya was due to make the payment by 29 January 2016 but missed the second deadline, forcing Diageo to release money to the bank.

The Standard Chartered loan was initially granted through a guarantee of shares in stakes in the Force India Formula One team, which is jointly owned by Mallya.

Earlier this month, Mallya accused Diageo of failing to found a new joint venture with him in emerging markets, which the drinks firm said it will “contest vigorously”.

In its most recent interim financial report, Diageo reported Mallya believes he “has certain claims against Diageo arising out of a failure to conclude a joint venture with him in respect to certain emerging markets in Africa and Asia (excluding India) and to provide significant financial benefits to him”.

However, Diageo claims only the “possibility” of such a deal was discussed at the time the group entered into its initial acquisition deal with USL in 2012.

In April 2015, board members of USL cast a vote of no confidence in Mallya and urged him to step down from his role.

This was as a result of an internal inquiry launched by Diageo into the firm’s finances, which uncovered a net loss of £445 million in its full-year 2013/14 results – attributed to a write down of the value of its Scotch whisky business Whyte & Mackay as a result of its sale to Emperador.