Creditors to the debt-laden Go First airline are set to move towards liquidation of the airline after finding no headway between banks and the two prospective bidders, five months after bids were formally received for the Wadia Group-owned carrier, said people familiar with the matter.
Lenders are putting final touches to a voting proposal seeking liquidation of the airline after both the bids – from a consortium of EaseMyTrip CEO Nishant Pitti and SpiceJet chairman Ajay Singh, and from Sharjah-based Sky One Aviation – were below their expectations. The voting proposal may be put up before the committee of creditors this week, the people said.
“Some processes like selection of proposed liquidator, calculating the cost of liquidation and funding of liquidation are being done, after which the proposal will be put to vote this week,” said one of the persons, who did not wish to be identified.
The timeframe for the insolvency process ends on August 3, before which creditors are likely to come to a decision.
“After negotiations with bidders, there was little scope for any increase. More importantly, both the bids were dependent on the ongoing arbitration claims in Singapore which lenders themselves are eyeing, so there is no point in dragging on this process now,” said the person.
ET’s queries emailed to resolution professional Shailendra Ajmera and lead lender Central Bank of India did not elicit a response till press time. Lenders expect a better recovery from the airline’s ongoing arbitration proceedings in Singapore against US-based engine maker Pratt & Whitney (P&W) than giving away the rights in the ongoing case by selling the airline.
They have sought more than $1 billion from P&W, accusing it of supplying faulty engines that were not replaced on time, resulting in the grounding of half the airline’s fleet and leading it to bankruptcy.
“Creditors expect more than $1 billion from the arbitration which is close to Rs 8,500 crore in today’s prices. Yes, there is a risk that the arbitration may not go the airlines’ way or P&W itself may not be able to fulfil the claims, but this is now an all or nothing call,” said a second person aware of the process.
Both bidders have taken the arbitration claims as part of their bids. While Sky One Aviation has offered Rs 735 crore upfront in cash and up to 20% of arbitration claims in the future, Ajay Singh has offered to pay Rs 650 crore over 12 months and 10% of arbitration claims.
Besides arbitration claims, creditors are expecting a minimum of Rs 1,965 crore from an auction of a prime 94-acre land parcel kept as collateral with them in Thane near Mumbai. Creditors have taken the call that these two recoveries are more feasible than selling the airline at a throwaway price.
Go First owes creditors about Rs 6,200 crore. Central Bank of India, Bank of Baroda and IDBI Bank are the secured creditors with Rs 1,934 crore, ?1,744 crore and Rs 75 crore of admitted claims, respectively.
Source: Economic Times