Lenders to the bankrupt Go First Airlines are set to put to vote a proposal to liquidate the defunct carrier after they received no proposals for reviving the airline. The committee of creditors (CoC) met on Wednesday, the last day for prospective bidders to submit resolution plans for the airline, and are leaning toward liquidation, people familiar with the process said.
“There are only two options, either liquidation or extend the resolution timeline in the hope of finding a buyer. Lenders are inclined toward liquidation since it is unlikely that this airline will find any buyers due to the legal and operational issues it is facing,” said a person familiar with the process.
Jindal Steel and Power promoter Naveen Jindal’s expression of interest (EoI), the only preliminary inquiry to make the cut as a bidder for the airline, did not translate into a final bid.
“Jindal neither bid nor asked for any extension of the timeline. Banks now have to take the call and liquidation looks the most likely option,” said the person cited above.
Earlier this month, ET had reported that lenders had extended the resolution timelines of the grounded carrier by another 90 days. Lenders now believe seeking a further extension might not help in securing a deal.
Go First owes creditors more than Rs 6,500 crore. Central Bank of India and Bank of Baroda are the top two creditors for the airline with Rs 1,987 crore and Rs 1,430 crore of dues, respectively.
“There is almost no scope for revival because this airline is also entangled in a legal dispute in the Delhi High Court. Then there is an arbitration going on abroad. Lenders believe that it is best to cut losses and move toward liquidation rather than prolong this pointless process,” said a second person aware of the issue.
Airplane lessors have taken Go First to the Delhi High Court, seeking deregistration of the planes since the leases were terminated prior to declaration of moratorium on May 10. The court is yet to pronounce its judgement in the case even as the regulator, Directorate General of Civil Aviation (DGCA) said in an affidavit that the recent order exempting aviation leases from bankruptcy moratorium should apply even to companies undergoing insolvency proceedings.
Go First is also seeking arbitration in Singapore against engine maker Pratt & Whitney, accusing the firm of supplying faulty engines that were not replaced on time, resulting in the grounding of half the airline’s fleet. Bankers said they would still pursue the arbitration in the hope of recovering some money.
“The resolution professional has asked about Rs 10 crore to continue with the arbitration and that will be added to the insolvency proceedings costs. That could also be approved by banks since there is a chance that the airline will benefit from it in the future” said the second person cited above.
