Go First heads towards liquidation after failed EaseMyTrip, SpiceJet bids

Go First owes creditors - Central Bank of India, Bank of Baroda, and IDBI Bank - around Rs 6,200 crore

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Creditors of Go First airline are moving towards liquidating the debt-laden carrier after failing to make headway with potential bidders – the consortium led by EaseMyTrip CEO Nishant Pitti and SpiceJet chairman Ajay Singh, and Sharjah-based Sky One Aviation. Five months after receiving bids, banks and the prospective buyers have reached an impasse, leaving liquidation as the most viable option, according to a report by The Economic Times (ET).

Earlier this month, the airline was ordered to release all four engines in its possession to the owner, Engine Lease Finance BV. Advocate Diwakar Maheshwari, representing the Resolution Professional (RP), informed the National Company Law Tribunal that the process of returning one engine had already begun. Additionally, advocate Anandh Venkatramani, representing the engine lessor, noted that their case might be dismissed following a High Court order directing the Directorate General of Civil Aviation (DGCA) to deregister all 54 aircraft, a decision Go First did not appeal.

The tribunal extended the insolvency process until August 3, instructing the Committee of Creditors (CoC) and the resolution professional to adhere strictly to this deadline with no further extensions.

CoC’s Go First voting proposal expected this week

According to the latest report, the CoC is now finalising a voting proposal for the airline’s liquidation after bids fell below expectations.

Both bids heavily relied on the outcome of ongoing arbitration claims in Singapore, which the creditors are prioritising. The creditors anticipate a better recovery from the arbitration proceedings against US-based engine maker Pratt & Whitney (P&W) than from selling the airline.

The voting proposal is expected to be presented to the CoC this week. Preparations for the proposal include selecting a proposed liquidator, calculating the cost of liquidation, and securing funding for the process.

Go First’s creditors seek $1 bn from P&W

Go First’s creditors have sought over $1 billion from P&W, accusing the company of supplying faulty engines that were not replaced on time, leading to the grounding of half the airline’s fleet and its subsequent bankruptcy. Last year, Wadia Group Chairman Nusli Wadia had claimed that the US company had caused damage worth more than Rs 10,000 crore to the airline.

The expected recovery from this arbitration is approximately Rs 8,500 crore. Despite the risk that the arbitration may not favour Go First or P&W might not fulfil the claims, creditors prefer to take this all-or-nothing approach, ET noted.

Both bidders included the arbitration claims in their proposals. Sky One Aviation offered Rs 735 crore upfront in cash and up to 20 per cent of future arbitration claims, while Ajay Singh proposed Rs 650 crore over 12 months and 10 per cent of arbitration claims.

In addition to the arbitration claims, creditors expect at least Rs 1,965 crore from auctioning a prime 94-acre land parcel in Thane near Mumbai, held as collateral. Creditors believe these recoveries are more promising than selling the airline at a low price.

Go First insolvency

Go First filed for voluntary insolvency on May 2, 2023, under Section 10 of the Insolvency and Bankruptcy Code (IBC). The NCLT admitted its plea on May 10, 2023. The airline joins the ranks of major carriers like Kingfisher Airlines and Jet Airways, which faced similar fates in 2012 and 2019, respectively, highlighting the persistent challenges in India’s aviation industry.

Go First, which owes creditors around Rs 6,200 crore, counts Central Bank of India, Bank of Baroda, and IDBI Bank as secured creditors with admitted claims of Rs 1,934 crore, Rs 1,744 crore, and Rs 75 crore, respectively.