Go First heads towards liquidation after failed bids from EaseMyTrip and SpiceJet
Creditors of Go First Airlines are in the process of liquidating the debt-ridden carrier after failing to make progress 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 potential buyers have reached an impasse, making liquidation the most viable option, according to a report by The Economic Times (ET).
Earlier this month, the airline was ordered to hand over 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. In addition, advocate Anandh Venkatramani, representing the engine lessor, noted that their case could be dismissed following a High Court order directing the Directorate General of Civil Aviation (DGCA) to deregister all 54 aircraft, a decision that Go First did not appeal.
The court extended the insolvency proceedings until August 3 and ordered the Creditors’ Committee (CoC) and the mediator to strictly adhere to this deadline and not grant any further extensions.
CoC’s Go First vote proposal expected this week
According to the latest report, the CoC is currently finalising a vote on the airline’s liquidation after bids fell short of expectations.
Both bids were heavily dependent on the outcome of ongoing arbitration claims in Singapore, which the creditors are prioritising. The creditors expect a better recovery from the arbitration proceedings against US-based engine maker Pratt & Whitney (P&W) than from the sale of the airline.
The motion for the vote is expected to be presented to the CoC this week. Preparations for the motion include selecting a proposed liquidator, calculating the cost of the liquidation and securing funding for the process.
Go First’s creditors are demanding $1 billion from P&W
Go First’s creditors have demanded more than $1 billion from P&W, accusing the company of delivering defective engines that were not replaced on time, leading to the grounding of half of the airline’s fleet and subsequent bankruptcy. Last year, Wadia Group Chairman Nusli Wadia alleged that the US-based firm had caused losses worth more than Rs 10,000 crore to the airline.
The expected proceeds from this arbitration are around Rs 8,500 crore. Despite the risk that the arbitration may not go in Go First’s favour or that P&W may default on its claims, creditors prefer this all-or-nothing approach, AND 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.
Besides the arbitration claims, creditors expect at least Rs 1,965 crore from the auction of a 94-acre prime plot 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 a voluntary insolvency petition under Section 10 of the Insolvency and Bankruptcy Code (IBC) on May 2, 2023. The NCLT admitted its petition on May 10, 2023. The airline joins the ranks of major carriers such as Kingfisher Airlines and Jet Airways, which faced similar fates in 2012 and 2019, respectively, highlighting the ongoing challenges in the Indian aviation industry.
Go First, which owes about Rs 6,200 crore to creditors, counts Central Bank of India, Bank of Baroda and IDBI Bank among its creditors with admitted claims of Rs 1,934 crore, Rs 1,744 crore and Rs 75 crore, respectively.
First print: Jul 17, 2024 | 12:14 PM IST