Go First lenders jittery on interim finance

“The lenders have already disbursed an interim financing of ₹100 crore to Go First," one of the two people said on condition of anonymity. However, lessors’ resistance to the resolution professional accessing the 52-odd aircraft until repayment of dues has stalled the plan, leaving lenders wary of extending any further interim credit, according to the two people.

The planned interim financing was meant to help Go First meet basic working capital requirements and resume flights with 15-20 aircraft so it generates cash to repay dues.

“The lenders will take a call on more funds after the (Delhi) high court decides on the litigation with aircraft lessors," said the first person who works with one of the lenders.

The airline owes over ₹6,521 crore to financial creditors, including Central Bank of India, Bank of Baroda, IDBI Bank and Deutsche Bank. It has also defaulted on payments of ₹1,202 crore to vendors and ₹2,660 crore to lessors. Despite the lenders’ offer of interim finance, the Wadia Group-founded airline and the lessors continue fighting in the Delhi high court over inspection, access and resumption of Go First’s grounded fleet.

“The entire resolution process has been frustrated by the legal roadblocks. A stronger government stance is crucial to sustain the viability of insolvency law," the second said on condition of anonymity. “A law on resolution process is redundant if it is plagued by legal cases that keep going on for years," the person added.

According to the second person, financing will depend on the promptness of the court ruling or if the government takes an immediate “serious step" to avoid further delay in resumption, which is not only deteriorating Go First’s assets but also turning the loan recovery prospects bleak.

“The issue is whoever loses the case in the high court, a further appeal is well-expected before the Supreme Court, prolonging the litigation for several months to over a year. What is the point of having a resolution law? The whole resolution process is taking longer than expected because of the litigation. We will be able to decide on the next course of action after the court delivers its judgement," this person added. “The airline’s resumption plan and its future hinge entirely upon the Delhi high court or any subsequent ruling by the Supreme Court."

To be sure, several prominent insolvency cases in India have dragged on longer than envisaged under the Insolvency and Bankruptcy Code (IBC). On average, it has taken 643 days to achieve resolutions against 330 days envisaged under the code.

A long-drawn court battle may completely derail Go First’s resumption plans and force even the remaining pilots to quit, according to the two people.

“This will also deteriorate most of the airline’s assets, cause an unfair flight-fare-price environment for passengers will significantly lower the prospects of loan recovery. This will make even any potential liquidation effort futile," said the second person, adding the airline has failed to draw any serious bids by PRAs (prospective resolution applicants) during August. “What will the PRA bid for? The litigation may barely leave the airline with any asset or business prospect."

Asked if the company could go into liquidation if the resolution does not pick up and how lenders would recover their loans, the banker cited above, however, said they have enough collateral to liquidate in case the need arises.

The strategy behind inviting PRAs was to raise ₹4,000-5,000 crore at one shot from a deep-pocketed, strategic partner who could come as a promoter so that the airline could repay most of its dues to the lenders and the lessors as quickly as possible.

“The load factor is improving and the industry as a whole is steadily growing. The growth potential is phenomenal. We are open to all types of large suitors," said the second person.

Go First’s resumption plan with fewer flights is in line with the Directorate General of Civil Aviation (DGCA), but a revised one had envisaged restarting flight operations with 26 aircraft. DGCA wants the airline to ensure there are enough pilots for Go First resumption.

“The lenders are ready to provide interim financing, Pratt and Whitney (P&W) is ready to supply and maintain aircraft engines, and the pilots are willing to work to help Go First make the most of the upcoming festive season and generate decent cash for the revival. But the lessors just don’t agree," said the second person. “Ultimately, the lessors too will lose the value if the condition of the grounded aircraft keeps deteriorating this way."

Late in July, P&W agreed to provide 4-5 engines and allied services every month to Go First after the Singapore International Arbitration Center (SIAC) directed the US-based aircraft engine maker to do so.

Emails sent to Go First’s lead creditors and the resolution professional remained unanswered till press time. Deutsche Bank declined to comment.

On 3 May, Go First filed for voluntary insolvency and suspended operations in the face of an acute engine scarcity and cash crunch. Meanwhile, on Wednesday, in the Delhi high court, one of the lessors of Go First informed that since the engines from several aircraft were removed on 6 December 2022 and no commercial flight has run since then, its plane is further deteriorating.

According to an argument by this lessor’s legal counsel, the RP cannot let the planes deteriorate.

Another Go First lessor has sought the court’s intervention in their recent plea, urging Go First to replace missing components, including fan blades, in their leased jets.

Another aircraft lessor, ACG Aircraft Leasing, has also sought court intervention, requesting further directions in their recent plea. This comes after their private filing earlier this month, where they urged Go First airline to replace missing components, including fan blades, in their leased jets.

In a July interim order, a Delhi high court single bench allowed the lessors to inspect their aircraft. A division bench of the high court and the Supreme Court later upheld the order.