Three Go First lenders open to rejigging airline's debt

Mumbai: Go First lenders Central Bank of India, Bank of Baroda (BoB) and Deutsche Bank have declined to provide additional finance immediately to the Wadia Group-promoted airline but are open to a debt recast involving a longer tenure for repayments, said people aware of the development.

Go First, which filed a voluntary insolvency resolution plea with the bankruptcy court on Tuesday, has put lenders in a quandary. Although the bank loans and debt facilities are classified as standard accounts now, lenders fear a steep haircut if a debt recast is not implemented soon.

Banks have provided debt facilities of Rs 4,500-5,000 crore, said one of the persons cited above. According to media reports, the company stated in its insolvency petition that it has financial liabilities of Rs 6,521 crore. The Delhi bench of National Company Law Tribunal (NCLT) will hear Go First’s voluntary insolvency petition today (May 4).


Central Bank of India has the highest exposure of Rs 1,987 crore which includes Rs 1,305 crore loans and Rs 682 crore provided under credit guarantee scheme during the outbreak of pandemic, according to a stock exchange filing. The bank has made a provision of Rs 1,500 crore against these loans, it said.

BoB’s exposure stands at Rs 1,430 crore, Deutsche Bank at Rs 1,320 crore and IDBI Bank has exposure of Rs 58 crore, according to disclosures by ratings company Acuite Ratings and Research in a January 19 report.

Central Bank and Bank of Baroda did not respond to ET’s queries. Deutsche Bank declined to comment.

A separate January 23 report by Brickwork Ratings said that JM Financial Credit Solutions has provided a Rs 150 crore long-term loan.

For over a year, existing lenders have refrained from providing new loans to the company partly due to the losses incurred by it. Last week, the Wadia Group informed lenders that in the absence of new loans, it would be forced to consider the voluntary insolvency resolution as an alternative to protect the company's assets, according to a lender. Wadia has pledged real estate valued at Rs 3,000 crore as collateral to lenders.

The difficulties in the recovery of debt from bankrupt Jet Airways and Kingfisher Airlines also contributed to lenders not disbursing new loans to Go First.

Lenders haven’t got anything from the Jet Airways filing even though it was admitted for insolvency four years ago. In the case of Kingfisher Airlines, lenders have recovered the principal loans by selling promoter Vijay Mallya’s real estate besides the pledged shares of United Spirits and Mangalore Chemicals and Fertilizers.

In the last three years, the Wadias have infused Rs 3,200 crore. Of this, Rs 290 crore was infused in April 2023 to keep the airline afloat, according to a statement issued by Go First.

After it failed to raise funds through a proposed public offer in 2021 largely due to the effects of the Covid pandemic on the aviation business, it was planning to raise money from the debt market. This was to have been through term loans of Rs 650 crore and short-term debt of Rs 550 crore, according to Acuite, which had downgraded the airline’s debt to Acuite BBB+ from A-.

While downgrading the debt, the ratings company said the consistent losses incurred in the past three years, which continued in the first half of FY23 resulted in higher dependence on external borrowings and group support.

The carrier blamed Pratt & Whitney’s defective and failing engines for grounding about half its fleet of Airbus A320 aircraft. The engine maker has in turn blamed lack of payments by Go First.