The consortium of SpiceJet's chairman and managing director Ajay Singh and Busy Bee Airways, associated with EaseMyTrip's chief executive officer Nishant Pitti, has increased their bid for bankrupt carrier Go First to around Rs 1,800 crore, sources aware of the ongoing proceedings told Moneycontrol.
"The Committee of Creditors (CoC) reached out to both parties that had shown interest in Go First last week after reaching an impasse on the valuation and discounts they were willing to take for the airline," a source aware of the ongoing discussions told Moneycontrol.
He added that the CoC directed the resolution professional for Go First to negotiate higher bids for the airline with the interested parties.
"The CoC had requested the RP to find out with the interested parties were willing to increase their bids by around 20-25 percent," a second official aware of the ongoing discussions said.
The second official added that the Singh-Pitti consortium has also proposed to increase its upfront payment to around Rs 500 crore, from around Rs 290 crore earlier, and has offered to pay off financial creditors from Pratt & Whitney arbitration proceeds.
Emails sent to Go First and SpiceJet remained unanswered at the time of publishing. A separate email sent to lenders also remained unanswered till the time of filing the copy.
Bids for Go First
After initially failing to attract any suitor, Go First received two bids for its acquisition on February 26.
SpiceJet promoter Ajay Singh and Busy Bee Airways promoter Nishant Pitti submitted a joint bid in their personal capacity, while the other bid is from Jaideep Mirchandani-owned Sky One Airways.
Ajay Singh and Busy Bee Airways had jointly submitted a bid of Rs 1,600 crore for the airline.
As part of their submitted proposals, both prospective buyers requested payments linked to the resolution of a lawsuit against engine manufacturer Pratt & Whitney.
Also, according to information sourced by CNBC-TV18, the upfront payment in the proposals is reportedly insufficient to cover the costs of insolvency resolution.
Both the potential buyers of Go First have not proposed a substantial initial payment to address the Corporate Insolvency Resolution Process (CIRP) expenses of the airline.
These estimated costs, around Rs 600 crore, according to sources, hold precedence under India's Insolvency and Bankruptcy Code (IBC) waterfall mechanism for dues recovery.
The Ajay Singh-Nishant Pitti consortium had proposed Rs 290 crore upfront and committed to fully repay financial creditors from Pratt & Whitney arbitration proceeds. Sky One offered Rs 410 crore upfront to lenders and 25 percent of arbitration proceeds to creditors.
Go First, promoted by the Wadias, filed for voluntary insolvency before the National Company Law Tribunal (NCLT) in May last year. The crisis-hit airline attributed its decision to engine supplier Pratt & Whitney (PW), alleging that the increasing incidents of failures of engines supplied by the US-based firm’s International Aero Engines forced its hand.
Bankers in two minds
Back in December 2023, lenders to troubled domestic carrier Go First, founded by billionaire Nusli Wadia, were looking to clear a proposal to liquidate the company, which had failed to meet multiple deadlines to resolve its ongoing debt crisis.
Go First's lenders had voted on a proposal to liquidate the insolvent airline in December.
GoFirst owes Rs 6,521 crore to lenders, including Bank of Baroda, Central Bank of India, Deutsche Bank and IDBI Bank, according to the information provided by the airline. 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.
Officials working with the airline who were aware of the ongoing discussions between Go First Resolution Professional Shailendra Ajmera, and the Committee of Creditors (CoC) said that the CoC values the assets of Go First at around Rs 3,000 crore.
"The CoC values Go First's assets at Rs 3,000 crore, which will be divided between customers, travel agents, banks and other lenders once auctioned off,” an official aware of the ongoing discussions said.
Another official said that Go First's strategy of not owning any of its aircraft and instead opting for a sale and leaseback model for operating all its planes made the airline very unattractive to potential buyers.
Restarting Go First
Even if the resolution plan for Go First is approved the airline will take a while to restart operations as most of its workforce, including senior management, has already left the airline over time.
The successful resolution applicant will need at least 1,000 people, including licensed staff such as pilots with currency, to recommence operations with a fleet of up to 10 aircraft, however, Go First currently has close to 300 employees left on payroll.
While most of the senior management, including Kaushik Khona – who was at the helm when operations ceased, and bankruptcy proceedings were initiated – left Go First last year, Head of Sales Rakesh Tiwari exited last week to join regional carrier Star Air.
Currently, only two vice presidents (legal and in-flight services), along with heads of the IOCC and customer services, remain in the senior management, along with a handful of junior staff, sources say. The entire mid-management reportedly left the airline in tranches last year.
Go First assets
Go First’s key remaining asset is a 94-acre parcel of land in Thane that the Wadia Group had given as collateral to the banks. The land is valued at approximately Rs 3,000 crore. Apart from the land, the airline’s assets also include an Airbus training facility in Mumbai and its headquarters.
Several entities had participated in the Expression of Interest (EOI) process run by Go First's resolution professional and overseen by the committee of creditors. However, Jindal Power was the only one the committee deemed suitable.
Other creditors
Apart from money owed to banks, the airline owes around Rs 2,000 crore to various aircraft lessors, around Rs 1,000 crore to its vendors, around Rs 600 crore to travel agents, and Rs 500 crore to customers with pending refunds.
Go First has also borrowed Rs 1,292 crore under the Centre’s emergency credit scheme, introduced during the covid crisis. The ultra-low-cost airline’s total liabilities amount to around Rs 11,000 crore, including its obligation to lessors.
The Wadia Group airline stopped flying on May 2, 2023, and the National Company Law Tribunal (NCLT) had admitted its plea for voluntary insolvency eight days later.
Go First had around 7,000 employees at the time it declared voluntary bankruptcy on May 2. The Wadia Group-owned airline halted operations and applied for insolvency resolution citing a financial crunch due to the absence of engines and spares, which had grounded half of its fleet.
GoAir had 56 leased aircraft when it suspended operations. Lessors of both engines and aircraft are fighting to take them back.
On 6 October, the ministry of civil aviation said the legal entities dealing in aircraft financing and leasing have estimated that the impediment being caused by the IBC, which was hampering repossession of the aircraft by the lessors, was costing Indian airlines an extra $1.2-1.3 billion than before in lease costs.
As a consequence, there could be a reduction in the supply of aircraft on favourable terms to India’s airline companies, which would adversely affect the entire aviation industry, the ministry said.
Go First Insolvency
Go First ceased operations on May 3, 2023.
The consortium led by Singh and Pitti collectively presented on February 16 a bid for the acquisition of Go First Airlines.
The National Company Law Tribunal (NCLT) in Delhi on February 13 approved the resolution professional's (RP) request for a 60-day extension to conclude the corporate insolvency resolution process (CIRP) of Go First.
Khona had in May 2023 told Moneycontrol that Go First was burning through about Rs 200 crore every month since November 2022, could no longer afford to do so and had to file for insolvency before the National Company Law Tribunal.
The airline hopes to resume operations as soon as possible, Khona had said then. Go First needs at least 20 aircraft to return to service and break even on daily operations. The airline blamed Pratt & Whitney for supplying faulty engines and failing to replace them in a timely manner, resulting in half of its 54-aircraft fleet being grounded.
In May, the airline had moved a plea before a court in Delaware, United States, seeking enforcement of an order issued by the Singapore International Arbitration Centre (SIAC) against American aerospace manufacturer Pratt & Whitney.
Go First, in the emergency petition moved before the Delaware Federal Court on April 28, called for a legal order to force Pratt & Whitney to comply with SIAC's two arbitral awards, issued on March 30 and April 15. The SIAC had, on March 30, ordered Pratt & Whitney to provide Go First with at least 10 serviceable engines by April 27, 2023, and the remainder by the year-end.
At the time, Khona had said that Go First would be able to return to full-scale operations by September if Pratt & Whitney provided the airline with the engines, as stipulated in the arbitration order.
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