Tuesday, May 09, 2023

Go First: Banks in wait-and-watch mode on fresh funding, seek clarity

Lenders to crisis-ridden Go First, which are owed over Rs 6,000 crore, are adopting a wait-and-watch approach before deciding to provide the airline with additional funds, a top banker said.

“Presently, it is status quo. At this point, I suppose banks aren't open for fresh funding due to uncertainty (on operations) and initiation of bankruptcy,” the banker said.

The comment assumes significance as Go First is currently facing a funding crunch that pushed it to file for bankruptcy.

However, experts said banks may ultimately fund the airline because its loans are still standard assets, which are not classified as bad loans.

The airline may ask creditors for more funds, a person aware of the matter told Moneycontrol.

The Wadia Group-backed airline said May 2 it halted flights and filed for voluntary insolvency resolution after grounding half of its fleet because of faulty engines supplied by US manufacturer Pratt & Whitney.

Experts said banks that have already lent to the domestic budget carrier may be ready to advance more money.

“The airline, in its voluntary insolvency application, said it has not defaulted on any payments. Considering this, there is no risk to the lenders and they will give more funds,” said Sonam Chandwani, managing partner at KS Legal & Associates.

An insolvency professional who worked on another airline’s proceedings said on condition of anonymity that Go First had kept banks in the dark when it went ahead with its insolvency proceedings.

“But if the Wadia Group gives backing or financial guarantees to the creditors, then banks will look at funding the airline,” the insolvency professional said.

08/05/23 Jinit Parmar/Moneycontrol

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