 "goair")
Go First, formerly known as Go Air, has successfully negotiated a longer repayment term for one of its loan accounts with French lender BNP Paribas, sources in the banking industry said.
The airline, which is preparing for an initial public offering to raise up to Rs 3,600 crore, has also received positive signals from aircraft lessors on deferring lease payments in view of the Covid-19 pandemic.
Go First initially wanted to restructure the loan in accordance with the K V Kamath panel’s guidelines on loan recast, but it was not acceptable to the bank. Following this, the airline negotiated with the lender to reschedule the payment of the principal amount as seven instalments.
“While the company initially wanted to restructure the loan under the Kamath panel parameters, it didn’t qualify as the parameters were too high. But ultimately the bank agreed to take into consideration that the company had the backing of the Wadia group,” said a banking source.
The Wadia group owns 100 per cent in the airline.
The Kamath committee had advised lending institutions to consider five ratios in restructuring: Outstanding liabilities to adjusted tangible net worth; debt-to-earnings before interest, tax, depreciation, and amortisation (Ebitda); the current ratio; the debt service coverage ratio; and the average debt service coverage ratio.
For any airline to be eligible for restructuring, the current ratio has to be equal to or higher than 0.4, while debt to Ebitda has to be equal to or less than 5.5.
“The current ratio of a typical airline in India will never exceed 0.3. Hence, 0.4 is a relatively high ask,” the person quoted above said.
The Wadia group’s backing has also allowed the company to further negotiate with aircraft lessors on deferring lease rentals.
The airline had mentioned in its draft red herring prospectus (DRHP) that four lessors had sent default notices related to 24 aircraft, claiming $35.75 million.
“What works for Go First is the guarantee by the Wadia group, which is part of the lease agreements. This gives much comfort and security to the lessors to bend a little and further restructure the lease rental period,” said an executive of a leasing firm.
Indian airlines, like many other airlines across the world, have been negotiating with lessors to defer or restructure their lease agreements as business has been severely hit by the pandemic. While most of them have restructured the pacts, the second wave of the pandemic is worrying lessors, who doubt airlines’ ability to pay, especially those with weak balance sheets.
An analyst with a brokerage firm said the Wadia group had shown intent and ability to back the firm, and hence it was much better placed than rival SpiceJet, which is currently valued at around Rs 4,000 crore.
“So, selling 25 per cent for Rs 2,500 -3,000 crore assumes a valuation of Rs 10,000 crore,” he said.
Go First recently raised Rs 546 crore as equity from Baymanco Investments Limited, a company owned by the Wadia group.
During FY21, due to the letter of credit given by the Wadia group, the company could get a fresh line of credit of Rs 500 crore from ICICI Bank. Additionally, it has availed of an additional facility of Rs 342 crore by Deutsche Bank AG.
