The Wadia Group, which owns the beleaguered Go First airline, is likely to push for a one-time settlement with banks under which creditors will take a “substantial haircut”, according to a Financial Express report citing legal experts. It added that as the Wadia Group has not defaulted on payment to creditors till date, it will not be barred from offering a resolution plan once the case is admitted by the NCLT.
Go First has filed its petition under Section 10 of the Insolvency and Bankruptcy Code to initiate insolvency against itself. The plea is different from Sections 7 and 9 where the financial and operational creditors, respectively, take the corporate debtor to the National Company Law Tribunal (NCLT) in case of default in payment of dues.
According to the FE report, corporate lawyer Ranjana Roy said, “Since the Wadia Group has till date not defaulted on payment to creditors, it won’t be barred from offering a resolution plan for the company once the case is admitted by the NCLT.”
Roy said it seems that the Wadia Group will come up with a resolution plan, but banks will have to take a substantial haircut on their dues. “Once the case is admitted, an interim resolution professional will be appointed, and the airline will get a moratorium and will not need to pay its past dues. All it will have to pay is the dues thereon like to oil marketing companies etc,” Roy said.
The report also quoted lawyer Ramji Srinivasan saying that the NCLT first needs to be convinced that the case of Wadia Group with regard to filing for insolvency is genuine. “I feel that once the case is admitted and moratorium granted, Wadia Group will negotiate with the banks on their payment plan under Section 12A, which provides for a one-time settlement of dues. Banks will definitely have to take a big haircut in this case,” Srinivasan said, as per the FE report.
Meanwhile, crisis-hit Go First’s urgent plea seeking voluntary insolvency resolution proceedings faced vehement opposition from aircraft lessors on Thursday, while the National Company Law Tribunal (NCLT) reserved its order on a day when the carrier extended cancellation of all flights till May 9.
Amid passengers’ concerns over their booked tickets, aviation regulator DGCA ordered the airline to process refunds under the prevailing regulations.
Go First, which has been flying for more than 17 years, has suspended the sale of tickets till May 15 and has told the watchdog it is working to refund or reschedule existing bookings for future dates.
In a reflection of turbulent times, lessors have sought the deregistration of 20 aircraft operated by Go First, as per the latest data from the Directorate General of Civil Aviation (DGCA).
As many as 28 planes or more than half of the airline’s fleet are grounded due to the non-supply of engines by Pratt & Whitney (P&W).
The airline’s net loss rose to Rs 3,600 crore last fiscal from Rs 1,807.8 crore in 2021-22. The net loss was Rs 1,346.72 crore in 2020-21.
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