Go First Bankruptcy: Promoter Wadia Group Considering One-Time Settlement Offer, Says Report
Kaushik Khona, CEO of the airline, said the insolvency plea was for resolution and the promoter Wadia Group would not exit the airline
Wadia Group, the owner of the crisis-hit Go First airline, is likely to push for a one-time settlement with banks under which creditors will take a ‘substantial haircut’, according to a Financial Express (FE) report. According to the report by FE, since the company has not defaulted, it will be allowed to offer a resolution plan, the May 4 report cited legal experts as saying on the day insolvency proceedings began at the National Company Law Tribunal (NCLT).
Go First’s Insolvency and Bankruptcy (IBC) petition was filed under Section 10, instead of Sections 7 and 9. While Section 10 allows a debtor to initiate insolvency proceedings against itself, Sections 7 and 9 allow creditors take the debtor to NCLT for recovery of dues, the report said.
Kaushik Khona, CEO of the airline, said the insolvency plea was for resolution and the promoter Wadia Group would not exit the airline. They were doing “everything possible to navigate the situation”, he said. Khona also told employees that Section 10 was better for IBC relief.
Civil aviation ministry officials told FE that the government won’t intervene as the matter was the NCLT but was “keeping a close watch” on developments.
The NCLT will continue to hear Go First’s petition on May 5. Its creditors include Bank of Baroda, Central Bank of India, Deutsche Bank, and IDBI Bank, who are owed Rs 6,521 crore. Vendor dues amount to Rs 11,463 crore.
On May 2, Go First suspended all flights for three days beginning May 3, claiming that half its fleet was grounded due to a lack of engine supplies from Pratt & Whitney and a severe cash crunch. On May 4, it extended the suspension by another 10 days starting May 6.
He said the airline grounded 28 planes due to the non-supply of engines by P&W, and that has resulted in a fund crunch. Go First, which has been flying for more than 17 years, has promised full refund to customers. It operated around 180-185 flights and carried around 30,000 passengers a day.
As a best case scenario, the airline expects that it could start operations by August or September this year but history says otherwise. No airline in India has been able to start operations after grounding. The prolonged efforts to revive Jet Airways, a first under Insolvency and Bankruptcy Code (IBC), have not borne any results yet.
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