Go First Goes Insolvent, A Huge Hit To Financial Vendors

Go First

Recently Indian Airlines Go First owned by the Wadia group has filed for insolvency. Indian banks such as Bank of Baroda, IDBI Bank, and others are in a position to lose their money as Go First owed them.

Go First owes an amount as big as 6,521 Crore rupees to its financial creditors BoB and IDBI. Not only BoB and IDBI, but the list of Go First’s financial creditors also include banks like the Central Bank of India and Deutsche Bank, as per the filing made by Go First.

The bankruptcy of Go First has caused the share prices of the concerned banks to plummet. While the share prices of Axis Bank, Bank of Baroda, and IDBI bank were down by 1.9%, 2.5%, and 1.1%, share prices of Central Bank fell by as low as 5% on Wednesday in early trade.

The settlements by Go First for its financial creditors have not been done yet. However, the filing for bankruptcy said that the defaults would be soon addressed. Considering the prevailing financial situation of the insolvency applicant, settlements would be imminent, as the filing stated.

Bank of Baroda and Central Bank together have an insecurity of 1,300 Crore Indian rupees after the insolvency of Go First Airlines. The exposure these banks have is under the consortium loan, as the insolvency filing said. IDBI bank, on the other hand, has an exposure comparatively much lower than the previously mentioned banks. The exposure IDBI has amounted to 50 Crore rupees.

In a statement made to stock exchanges, Axis Bank has made the statement stating that Go First does not owe it anything anymore. The settlement for Axis Bank has been made by the airline company, as it claimed.

The former head of retail research at SBI Securities, Mahantesh Sabarad, who is also a market expert working independently, made the statement that judging from the current financial position of the insolvency applicant; the recovery by its financial creditors would not exceed 25-30%.

Image Source : https://images.indianexpress.com/2023/05/gofirst.jpg?w=640

Mahantesh Sabarad also made a statement to reporters regarding the recovery by the financial creditors. He mentioned that the solvency of Go First is a big shock to its financial creditors as airlines owe them Crores of rupees and it is also impacting their share prices to an extent. However, he has said that certain assets that airlines own including the aircraft on orders out of all the assets can be used to realize a certain portion of the amount that is due to the creditors.

Along with this statement, he has made it very clear about not being very optimistic regarding the recovery of the due amount. What he means is that the financial creditors’ exposure will remain uncovered for an unspecified duration and also the amount that will be realized will be around 25-30% of the amount that had been granted to the airlines.

Go First, the Indian airlines from Wadia group had filed insolvency for not being able to meet its financial obligations. Airlines blame the American company Pratt & Whitney’s faulty engines for the same.