After extending the insolvency resolution timeline of the beleaguered Go First by another three months, lenders to grounded are hinging their hopes on Naveen Jindal-led Jindal Steel & Power Ltd (JSP) for revival of the company.
Last month, Jindal Steel & Power submitted the sole expression of interest (EOI) for the airline, which voluntarily filed for insolvency resolution proceedings in May this year, according to the person familiar with the matter. The EOI was floated by the airline’s resolution professional Shailendra Ajmera in July this year.
Lenders to the airlines include Bank of Baroda, Central Bank of India and IDBI Bank, with a total outstanding of over Rs 4,500 crore.
“Banks are betting on JSP and are optimistic that it will be a successful bidder for Go First,” said an official of a bank.
There are no indications that the lenders will approach the airline’s promoters the Wadias to seek their interest in reviving the grounded airline.
On Monday, Go First’s committee of creditors (CoC) met and extended the timeline for the corporate insolvency resolution plan (CIRP) by another 90 days.
The extension was given as lenders are awaiting the Delhi High Court’s decision on lessors’ plea to take back their planes which are on lease with Go First, and also to give enough time to JSP to submit its resolution plan, sources said. JSP has time till the end of this month to submit its resolution plan. Go First has 56 leased aircraft.
The Delhi High Court will soon hear the matter. However, if the judgement comes in favour of lessors, the airline will go into liquidation, which means banks will have to take a huge haircut, said another source.
Lenders had earlier approved a funding plan of Rs 450 crore to help resume operations of the grounded airline. Of that they have already given Rs 100 crore for the payment of salaries to employees, maintenance of aircraft and insurance, said the person close to the development.
Bank of Baroda, which has an exposure of around Rs 1,300 crore to the airline, has classified the loans as non-performing assets (NPA). Last month, the Central Bank of India, with loan dues of around Rs 1,900 crore to Go First, declared the account as NPA last month.
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Another challenge lenders are facing is the recent notification by the Ministry of Corporate Affairs (MCA) amendment in the Insolvency and Bankruptcy Code (IBC), which has excluded transactions related to aircraft, plane engines, airframes and helicopters from the Insolvency and Bankruptcy (IBC) code, the government has notified.
“…the provisions of sub-section (1) of section 14 of the Insolvency and Bankruptcy Code, 2016, shall not apply to transactions, arrangements or agreements, under the Convention and the Protocol, relating to aircraft, aircraft engines, airframes and helicopters,” the notification, issued on October 3, said.
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Section 14 of the Insolvency and Bankruptcy Code, 2016 refers to the power of the Adjudicating Authority, which is the National Company Law Tribunal (NCLT) to issue a moratorium when admitting a company to insolvency resolution process.
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