MC Exclusive: Go First lenders open to extending fresh loans to revive airline’s operations

“The committee or creditors (CoC) appointed a new RP. We want to revive the company and now with the appointment of a new RP, we are looking at a faster resolution plan," said a person aware of the development.

On June 9, the CoC appointed Shailendra Ajmera, Partner, Transaction Advisory Services at Ernst & Young (EY) as the RP in the airline's insolvency case. Ajmera’s selection is pending with the National Company Law Tribunal’s (NCLT) approval.

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

Moneycontrol earlier reported that lenders to the airlines have adopted a wait-and-watch approach before deciding to provide the airline with additional funds.

Insolvency process

On May 2, the Wadia group-owned airline requested voluntary insolvency resolution proceedings as well as an interim moratorium on financial obligations due to liabilities of Rs 11,463 crore.

The airline filed for voluntary insolvency in the NCLT in New Delhi on May 10 under Section 10 of the Insolvency and Bankruptcy Code (IBC). Section 10 of the IBC deals with the initiation of the corporate insolvency resolution process by corporate applicants that have defaulted on loans.

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

Also read: Go First CoC appoints Shailendra Ajmera as resolution professional: Report

The low-cost carrier had said its financial crisis was sparked by "faulty" Pratt & Whitney engines that grounded about half its 54 Airbus A320neos. The US engine maker, a part of Raytheon Technologies, has called the claims without evidence.

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

The aircraft lessors challenged the NCLT’s order at the National Company Law Appellate Tribunal (NCLAT) on the ground that they were not given an opportunity to put forth their case at the NCLT and also alleged that the airline was trying to hold on to assets that it did not own.

According to the lessors, the leases with the airline were terminated days before the NCLT order on May 10. They argued at the tribunal that the moratorium should therefore not apply to them.

However, on May 22, the NCLAT upheld the order of the NCLT and directed the lessors to move an appropriate application at the NCLT regarding the status of their aircraft.

Also read: MC explains: One month on, what is the status of Go First insolvency case?

The appellate tribunal also granted liberty to the Interim Resolution Professional (IRP) to move an application at the NCLT with respect to the claims of both parties relating to the aircraft in question.

While the lessors have not challenged this order at the Supreme Court as yet, Go First has filed a caveat in anticipation of the appeal.

On June 9, the airline further extended the suspension of its flight operations till June 14 even as it expressed hope that it would soon be able to resume bookings.

The cash-starved airlines had previously suspended operations until June 12.