Go First's Fate Hangs in Balance as Liquidation Option Nears

Go First is almost set to be liquidated, as key lenders prepare to vote on the liquidation option at an upcoming Committee of Creditors (COC) meeting.

By Priyal Dutta 19 Jul 2024 in Airline Aviation

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The lenders are finalizing specifics such as picking the liquidator, calculating the cost, and organizing the money before submitting the plan to the vote

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Will Go First Survive? Liquidation Option on the Table

Go First is facing imminent liquidation, as reported by the Economic Times. The airline ceased operations in May 2023 and filed for administration shortly afterwards. Two bids for what remained of the airline fell below the lenders' expectations, and negotiations with the bidders have not resulted in any changes.

The bankers now believe they would earn a greater return by pursuing a USD 1 billion lawsuit against Pratt & Whitney, whose engine difficulties contributed to Go First's demise

The lenders are finalizing the details of the liquidation, including selecting the liquidator, determining the costs, and organizing funding, before putting the proposal to a vote in an upcoming Committee of Creditors (COC) meeting. Four banks—Central Bank of India, Bank of Baroda, IDBI Bank, and Deutsche Bank—are among the largest creditors in the COC.

Four banks—Central Bank of India, Bank of Baroda, IDBI Bank, and Deutsche Bank—are among the COC's largest creditors

The creditors had preferred to sell the airline rather than liquidate. Still, a court ruling in April ordered the deregistration of Go First's aircraft and their return to lessors, diminishing the airline's value. Subsequently, the mood changed, and the lenders now believe they would get a better return from pursuing a USD 1 billion lawsuit against Pratt & Whitney, whose engine issues contributed to Go First's downfall.

In addition to the litigation, the COC aims to sell a 94-acre plot of land near Mumbai for about INR20 billion

Two bids were submitted for the airline, one from Sharjah-based Sky One and the other from EaseMyTrip founder Nishant Pitti and SpiceJet CEO Ajay Singh. However, both bids were below the lenders' expectations and dependent on ongoing arbitration claims in Singapore, which the lenders themselves are pursuing.

The COC meeting, where the decision on Go First's future will be made, is expected within the week

In addition to the lawsuit, the COC intends to sell a 94-acre parcel of land near Mumbai, expected to yield almost INR20 billion. The lenders argue that pursuing the lawsuit and selling the land will result in a more profitable outcome than selling Go First at a significant discount.

As the courts have warned, the official corporate insolvency resolution process ends on August 3, and there will be no more extensions

The COC meeting, where the decision on Go First's future will be made, is expected within the week. As the courts have warned, the official Corporate Insolvency Resolution Process ends on August 3, and no further extensions will exist.

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