Go First considers outside funds for a backup plan

24 Jul 2023 , 10:54 AM

In order to ensure that it can resume operations as soon as possible, even if formal banking support is delayed, Go First, the first Indian airline to voluntarily seek bankruptcy protection, is contacting special-situation financiers like asset reconstruction companies (ARCs) and distressed debt funds for short-term priority funding.

On May 3, the airline requested the opening of voluntary insolvency proceedings before the NCLT’s Mumbai branch, blaming the decision on protracted delays in obtaining airworthy engines from Pratt & Whitney (P&W).

Priority finance is available under the Insolvency and Bankruptcy Code (IBC) following a company’s admission into the NCLT at a higher rate. According to those with knowledge of the situation, this is taken into account when calculating the costs of the corporate insolvency resolution process (CIRP) and continues to be ranked above banks for repayment.

The two primary lenders for the grounded airline, Bank of Baroda (BoB) and Central Bank of India (CBI), have in principle agreed to lend Rs 450 crore, but they still require board permission. Due to the company’s designation as a non-performing asset, the approvals process also takes longer.

A person with knowledge of the situation told ET that ‘finding an alternative source of funds is necessary so that procedural issues do not impact the revival, leading to deterioration of assets.’

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