Lenders of low-cost airline Go First went into a huddle on Wednesday after it declared that it is seeking a resolution under the National Company Law Tribunal (NCLT). Sources said lenders held internal meetings to assess the situation. A meeting of all the lenders is likely to happen soon, three senior bankers said. However, most believe that the banks may resort to higher provisioning for the company’s accounts in the April-June quarter.
“While filing for resolution will bring all creditors together, the resolution must be accepted by the committee of creditors (CoC). I think banks will start providing for these loans from the June quarter,” said a private sector banker. Kaushik Khona, Go First CEO, on his part, told TV channels that bank loans are not only secured by the company assets, but lenders have collateral in the form of unencumbered land of more than 94 acres in a prime location in Mumbai. The value of the land was assessed at around Rs 3,000 crore earlier. He believes that with the recent changes in real estate and the improvement in the development potential, the value has increased further. And if the company were to securitise that, it will be more than the banks’ exposure in the company.
The airline’s leading lenders, including Central Bank of India, Bank of Baroda, IDBI Bank and Deutsche Bank, among others, have nearly Rs 5,600 crore of exposure to Go First, as per a report by Acuite Ratings & Research in January. According to the report, Bank of Baroda had Rs 1,430-crore exposure to the airline and Deutsche Bank had about Rs 1,320 crore. As per a separate exchange notice from Central Bank of India on Wednesday, its outstanding exposure as on March 31 stood `1,305 crore and an additional amount of Rs 682 crore has been sanctioned to the airline under the Centre’s emergency credit line guarantee scheme.
“Our exposure to the company is only 0.91% of our total advances as of March 31 and interest charged up to April 30 is serviced by the company. In the recently published results for FY23, the bank has made contingency provisions of more than Rs 1,500 cr in the books to strengthen the balance sheet,” the bank said. Shares of Central Bank of India and Bank of Baroda closed 5.1% and 1.9% lower on the BSE.
Reports said that the airline owes financial creditors Rs 6,521 crore and hasn’t defaulted on any of the loan facilities as on April 30. Another official at a large private bank, which has a small exposure, said lenders are holding internal meetings and are preparing to discuss the matter with consortium banks in days to come.“While the overall exposure is not too large, the main worry is that the airline has stopped flying. So, one can see if the airline continues as a going concern and that will give comfort to lenders. So, the next 48 hours are crucial for clarity,” the first private banker quoted said.