Go First Faces High-Stakes Debt Resolution: INR 23,777 Crore Claims & EOI Surge

Go Airlines (India) Ltd, a prominent aviation company in India, has recently received claims amounting to ₹23,777 crore ($2.9 billion) from a combination of operational and financial creditors as part of its ongoing insolvency process. Two credible banking sources confirmed this development, shedding light on the significant financial challenges the company is facing during this critical period.

In accordance with Indian law, when a company faces bankruptcy, a well-defined procedure is set in place, granting every creditor the right to seek payment and remedy by submitting their claims. This legal framework ensures a fair and transparent process for resolving the company’s financial difficulties. Subsequently, a resolution professional is entrusted with the responsibility of thoroughly examining and verifying the authenticity of the claims filed by creditors.

According to a banker from a state-run bank who has exposure to Go Airlines, the claims from the lenders stand at approximately ₹5,000 crore, while the lessors’ claims amount to around ₹18,000 crore as of the recent meeting of the committee of creditors held on July 21. This information was reported by Reuters, providing insights into the current financial situation of Go Airlines and the significant dues owed to both lenders and lessors.

As of the present moment, the resolution professional responsible for overseeing Go Airlines’ insolvency proceedings has not yet completed the authentication process to verify the validity of the claims submitted by creditors, including lenders and lessors. This verification process is a crucial step in the insolvency resolution procedure, as it ensures that only legitimate and valid claims are considered for further actions, such as distribution of available funds.

Go Airlines, the operator of Go First carrier, took the step of seeking bankruptcy protection in May, citing the grounding of nearly half of its 54 Airbus A320neos as the primary reason. The grounding was attributed to issues with “faulty” Pratt & Whitney engines, which significantly impacted the airline’s operational capabilities and financial stability.

Raytheon, the parent company of Pratt & Whitney, has stated that the claims made against them by Go Airlines are without merit. In response to the airline’s assertion that the grounding of approximately half of its Airbus A320neo fleet was due to “faulty” Pratt & Whitney engines, the engine manufacturer has refuted these allegations, asserting that there is no substance to support such claims.

In a recent development, Go Airlines extended an invitation to potential investors to express their interest in the company’s financial restructuring through a court-appointed administrator. The invitation aims to attract investors who are interested in exploring investment opportunities and participating in the insolvency resolution process.

Investors have been given until August 9 to submit their expressions of interest (EOI) to demonstrate their intent to invest in Go Airlines. This deadline provides interested parties with a specific timeframe to evaluate the company’s financial prospects, assess the risks and opportunities, and decide on the viability of potential investments.

According to a second banker familiar with the matter, Go Airlines has received 40 queries on expressions of interest (EOIs) from potential bidders. These queries represent the preliminary interest shown by various parties to explore the possibility of investing in the airline as part of its insolvency resolution process. However, as of the current update, no formal submissions of EOIs have been made by any potential bidders.

The bankers, who provided information about Go Airlines’ situation, declined to reveal their identities due to a lack of authorization to interact with the media. As employees of financial institutions, they are bound by confidentiality and compliance regulations that prohibit them from disclosing sensitive information to the media without proper authorization.

On July 21, India’s aviation regulator made an announcement stating that Go Airlines (the operator of Go First carrier) could resume its flight operations subject to meeting specific conditions. These conditions are outlined to ensure that the airline can operate safely and sustainably, taking into consideration its financial situation and overall operational capability.

According to the banker familiar with the matter, the resolution professional overseeing Go Airlines’ insolvency proceedings is currently awaiting the disbursement of funds from banks. Last month, the banks provided in-principal approval for the funds to support the airline’s operations and potential revival.