MUMBAI- Lenders of the financially distressed Indian LCC Go First, established by the Wadia family, are reportedly considering a proposal to liquidate the airline.
The decision is expected to undergo a voting process by the lenders, which may take place as early as this week. Individuals familiar with the matter, including bankers and airline officials, revealed to MoneyControl (MC) that the proposal for liquidation is under consideration due to Go First’s failure to meet several deadlines in resolving its ongoing debt crisis.
Go First Airlines Nears End
Go First is facing a debt of Rs 6,521 crore owed to lenders such as Bank of Baroda, Central Bank of India, Deutsche Bank, and IDBI Bank and is now contemplating liquidation, according to information provided by the airline.
Central Bank of India has the highest exposure at Rs 1,987 crore, followed by Bank of Baroda at Rs 1,430 crore, Deutsche Bank at Rs 1,320 crore, and IDBI Bank at Rs 58 crore.
A leading banker mentioned that the resolution plan’s timeline extension has been denied, and liquidation is now a potential course of action.
Meanwhile, insiders revealed that the Committee of Creditors (CoC) values Go First’s assets at around Rs 3,000 crore, and a liquidation vote is anticipated this week.
The airline’s strategy of not owning its aircraft, opting for a sale and leaseback model, has reportedly made it less appealing to potential buyers, complicating efforts to revive the airline, reported MC.
Assets of the Airlines
The primary remaining asset for GoFirst is a 94-acre land parcel in Thane, pledged as collateral by the Wadia Group to the banks and valued at around Rs 3,000 crore.
Besides the land, the airline possesses assets such as an Airbus training facility in Mumbai and its headquarters.
During the Expression of Interest (EOI) process, various entities participated, overseen by the committee of creditors and managed by GoFirst’s resolution professional. However, Jindal Power emerged as the sole entity deemed suitable by the committee.
Liabilities
In addition to the debts owed to banks, Go First has outstanding amounts, including around Rs 2,000 crore to various aircraft lessors, approximately Rs 1,000 crore to vendors, about Rs 600 crore to travel agents, and Rs 500 crore to customers awaiting refunds.
The airline has also availed Rs 1,292 crore under the government’s emergency credit scheme introduced during the COVID crisis. The total liabilities of the ultra-low-cost airline stand at around Rs 11,000 crore, encompassing its obligations to lessors.
Go First, owned by the Wadia Group, ceased operations on May 2, 2023, and its plea for voluntary insolvency was admitted by the National Company Law Tribunal (NCLT) eight days later.
At the time of filing for bankruptcy, the airline had approximately 7,000 employees. Financial constraints due to the unavailability of engines and spares, which grounded half of its fleet, were cited as the reason for the insolvency application.
As of October 6, the Ministry of Civil Aviation highlighted that the Insolvency and Bankruptcy Code (IBC) was causing hindrances in repossessing aircraft by lessors, resulting in an additional cost of $1.2-1.3 billion in lease expenses for Indian airlines. This situation could lead to a reduced supply of aircraft on favorable terms for the Indian aviation industry, impacting the sector adversely.
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