Saturday, February 27, 2021

Go Air receives Rs 800 cr lifeline from banks amid turbulent times

Mumbai: Wadia group-promoted Go Airline India Ltd (Go Air) has received a Rs 800 crore credit line from banks which will help the airline navigate through turbulent times that the aviation sector is facing due to the Covid-19 pandemic.

According to banking industry sources, the airline had applied for a debt restructuring under the Reserve Bank of India One Time Debt Restructuring Scheme that was announced in August 2020. However, with this credit line, the airline will not need to recast its loans.

“Banks have extended credit of Rs 700 crore - Rs 800 crore to the airline. This funding will be sufficient for the company for the next couple of years. This also means the airline will not need any debt restructuring,” a senior banker told Business Standard.

Go Air declined to comment on the story when contacted. “As a policy, GoAir does not comment on market speculation,” a company spokesperson said in response to an emailed query.

Companies that are stressed have been finding it difficult to restructure their loans as banks have taken an extremely cautious approach. In addition, the KV Kamath panel, which outlined the contours of the onetime debt recast scheme, recommended stringent norms.

The Kamath panel recommended 5 parameters for debt restructuring - outstanding liabilities to adjusted tangible net worth; debt-to-earnings before interest, tax, depreciation, and amortisation (Ebitda); current ratio, debt service coverage ratio and the average debt service coverage ratio.

For any airline to be eligible for restructuring, the current ratio has to be equal to or higher than 0.4, while ‘debt to Ebitda’ has to be equal to or less than 5.5.

Sources said the loans extended to Go Air were under the Emergency Credit Line Guarantee Scheme 2.0.

27/02/21 Manojit Saha/Business Standard

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