Go First, an Indian airline, filed for bankruptcy on Tuesday and owes creditors Rs 6,521 crore ($798 million), according to the bankruptcy petition. It announced its bankruptcy to the surprise of its vendors, lessors of aircraft, and financial creditors.
The airline owes a total of Rs 11,463 crore to all of its creditors, according to the bankruptcy petition, which was obtained by news agency Reuters.
Dues to banks, financial institutions, vendors, and aircraft lessors are included in this. They are all concerned because the airline claimed in its bankruptcy case that its assets are insufficient to cover its liabilities.
“Currently, the assets of the company are not sufficient to meet its liabilities” the airline said in the filing. It should be highlighted that Go First already owes operating creditors Rs 1,202 crore in unpaid vendor invoices and Rs 2,660 crore in unpaid aircraft lessor invoices.
According to the filing, it has received notices from lessors that their leases on aircraft are coming to an end, and some have even begun taking legal action against the airline to ground or reclaim their aircraft. Additionally, six lessors have used letters of credit that lenders have given to them.
While the airline was going through a challenging financial phase characterised by a severe cash crunch, none of the lenders were aware of Go First’s abrupt move beforehand. According to the bankruptcy petition obtained by news agency Reuters, Go First owes its creditors a total of Rs 6,521 crore. This led to a dramatic decline in share prices on Wednesday.
According to the filing, as of April 30th, Go First had not fallen behind on any of these payments. However, the airline stated in its filing that financial creditors’ defaults would be “imminent”. “However, considering the present financial situation of the corporate applicant, defaults to financial creditors would be imminent,” the filing said.
The financial creditors of Go First were not informed of the airline’s intentions to declare voluntary insolvency and will meet soon to assess the situation, according to news agency Reuters, which cited two people with knowledge of the issue.
The Central Bank of India, Bank of Baroda, IDBI Bank, Axis Bank, and Deutsche Bank are listed as creditors of Go First in the petition. As part of a consortium loan, the Central Bank of India and Bank of Baroda each have an exposure of Rs 1,300 crore, while IDBI Bank has a lower exposure of Rs 50 crore.
Deutsche Bank opted not to respond. The other banks did not immediately respond to emails sent to them.
The bank’s overall exposure to the airline, according to a Central Bank of India official, is estimated to be over Rs 2,000 crore. According to the document, the airline has a letter of sanction of credit for Axis Bank. It did not, however, mention if the airline had used this credit.
In early trading, shares of the Central Bank of India fell by more than 4%, while those of Bank of Baroda fell by 2.80%. Axis Bank shares fell by 0.79 percent, while IDBI Bank shares fell by about 1%.
Go initially has also taken up a Rs 1,292 crore emergency credit loan through the government, which was initially implemented during the Covid-19 pandemic. Government assurances bank loans made to a business as part of the scheme.
