MC Exclusive: Wadia Group approaches lenders for funds to restart Go First operations

GoFirst owes lenders, including Bank of Baroda, Central Bank of India, Deutsche Bank and IDBI Bank Rs 6,521 crore

The Wadia Group is seeking to raise funds to restart its bankrupt airline GoFirst as soon as possible and has approached lenders to borrow up to Rs. 225 crore, people aware of the matter said.

"The airline is seeking funding within sanctions to fund the operations of the business. They are looking for fresh funds of up to Rs 225 crore,” one of the lenders to the airline said.

An insolvent company can raise funds under sanctions through an Interim Resolution Professional to remain operational. The sanction limit of funds can be raised in future if lenders agree.

The lenders said that since the bankruptcy has been initiated under the Corporate Insolvency Resolution Process (CIRP) before the National Company Law Tribunal (NCLT), the matter is still under discussion among GoFirst’s creditors.

“The banks will do anything to fund (the airline) only under the NCLT framework,” the lender cited above said.

Moneycontrol had reported earlier that the banks are not looking at lending to GoFirst before the completion of the resolution process.

The change comes after the airline started looking for loans to pay employees, oil marketing companies and airports in an attempt to restart operations, senior executives close to the development said.

“The airline immediately needs fresh funding to restart and scale up domestic operations,” said one of the executives.

GoFirst’s insolvency and bankruptcy petition was filed under Section 10 instead of Sections 7 and 9. While Section 10 allows a debtor to initiate insolvency proceedings against itself, Sections 7 and 9 allow creditors to take the debtor to the NCLT to recover dues.

Also read: Go First unlikely to restart operations for a month

GoFirst owes lenders, including Bank of Baroda, Central Bank of India, Deutsche Bank and IDBI Bank Rs 6,521 crore, according to the airline’s filing.

Central Bank of India had the highest exposure of 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, Acuite Ratings and Research said in a January 19 report.

Also read: The case of Go First may set off a trend of crisis-ridden companies opting for temporary relief from lenders during times of stress

Insolvency proceedings

The airline filed for voluntary insolvency in the NCLT in New Delhi on May 10 under Section 10 of the Insolvency and Bankruptcy Code. It also suspended flights.

The NCLT admitted Go First’s petition, granting it bankruptcy protection and disallowing lessors from repossessing the carrier’s aircraft.

In its application, Go First blamed engine-maker Pratt & Whitney for its situation, saying it had refused to comply with an award issued by the Singapore International Arbitration Centre (SIAC) in favour of the airline.

Also read: Exclusive: Lenders in no mood to pump fresh funds into Go First till resolution

The SIAC asked Pratt & Whitney on March 30 to provide Go First with 10 serviceable engines by April 27, 2023, and 10 engines each month until December this year.

The airline is seeking compensation from Pratt & Whitney for the faulty engines. With fewer operating aircraft, its market share shrank, leading to a loss of revenue and delayed payments to vendors.

Queries sent to the lenders and GoFirst via separate emails did not elicit a response till the time of publishing this article.

Also read: NCLT's decision to admit Go First's insolvency riles lessors and vendors, leaves employees confused