Lenders to Go First Airlines are seeking to take full control of the carrier’s resolution process at the National Company Law Tribunal (NCLT), having replaced key bankruptcy-related officials appointed by the company that took itself to NCLT.
In the first meeting held Friday, the committee of creditors (CoC) replaced the company-appointed interim resolution professional (IRP), process advisor and legal agency to show their intent of controlling the country’s biggest voluntary bankruptcy-protection case since the Insolvency and Bankruptcy Code (IBC) came into force.
On Saturday, ET reported that the CoC had appointed EY-backed Shailendra Ajmera as the resolution professional, replacing Alvarez & Marsal (A&M)-backed Abhilash Lal, the IRP appointed by the airline.
ET has learnt that the CoC will file for more changes before the NCLT by Tuesday, with A&M being replaced as the process advisor by EY, and J Sagar Associates being brought in as the legal advisor to the CoC.
Trilegal, IRP’s legal advisor, will also be replaced as firms such as Shroff & Co, Luthra & Luthra and Cyril Amarchand Mangaldas are in the fray. “Lenders were a bit apprehensive, rightly or wrongly, about continuing with the same support firms appointed by the company. They didn’t want to take a chance about questions being asked later; so it was thought best to change everybody,” said a person familiar with the process.
Bid to avoid conflict of interest
The CoC wants to avoid any conflict of interest as far as possible; so any advisor or firm that has even remotely served the promoters or the management previously is being weeded out.
“All firms had been given a chance to offer their expertise but firms associated with the company anytime previously were at a disadvantage,” said a second person aware of the exercise. “Khaitan & Co, which had filed the plea on behalf of the company, or even Shardul Amarchand Mangaldas also had a relationship with the company before. Lenders want to ensure there is not even a remote possibility of conflict of interest.”
Go First owes creditors led by the Central Bank of India more than ₹6,500 crore. The Central Bank has ₹1,987 crore of outstanding loans, including about ₹650 crore of post-Covid emergency lines. Other large lenders include Bank of Baroda ( ₹1,430 crore) and Deutsche Bank ( ₹1,320 crore). The German lender has lent mostly in foreign currency.
Having been surprised by the voluntary insolvency filed by the company, which gives it a moratorium on loan repayments, lenders want to ensure that they control the insolvency process fully to maximise value.
“Bankers also were focused on the expertise the professionals bring in. Though A&M is a specialist in resolution of stressed assets, EY has a wider practice and can get additional expertise in a tricky sector like aviation, which has its peculiar issues,” said the second person cited above.
Resumption delays
Lenders are also wary of delays in starting the airline. Delays will lead to erosion of public trust and trigger the exodus of key employees to rival airlines. So far, the airline has postponed its restart at least half and dozen times, the latest until June 14.
“Banks are open to funding the airline because an operating airline will only generate value. However, before agreeing for any interim funding, lenders would like to get an okay from the directorate general of civil aviation to ensure that the funds released by banks are not wasted,” said a third person aware of the discussions.
Lenders have so far rejected pleas by the airline management to release unused funds. But complete control on the resolution plan and an assurance by the aviation regulator could change their mind.
