India's Go First (Mumbai International) faces almost certain liquidation, with the Economic Times reporting key lenders are finalising preparations to put the liquidation option to the vote at an upcoming committee of creditors (COC) meeting. Two bids for what remains of it were below the lenders' expectations, and ongoing negotiations with the bidders have not changed that. In an all-or-nothing play, the lenders believe they'll get a better return pursuing a USD1 billion lawsuit against Pratt & Whitney, whose engine issues contributed to Go First's downfall.
A source close to the talks said the lenders are finalising details such as selecting the liquidator, working out the cost, and organising funding, before putting the proposal to the vote.
Go First ceased operations in May 2023 and filed for administration shortly afterwards. The airline's administrator later accepted creditor claims totalling INR65.21 billion rupees (USD780 million). Among the biggest creditors are four banks - Central Bank of India, Bank of Baroda, IDBI Bank, and Deutsche Bank - which steer the COC. Until recently, the committee preferred to sell the airline rather than liquidate, calculating they'd get a better return from a sale, but in May ch-aviation reported that the mood had changed after an April court ruling ordered Go First's aircraft be deregistered and returned to lessors, stripping value from the airline.
Around the same time, a sales campaign had concluded and attracted two bids. One came from Sharjah-based Sky One, the other from EaseMyTrip founder Nishant Pitti and SpiceJet (SG, Delhi International) CEO Ajay Singh. Pitti later dropped out. However, even before then, it was widely reported that the bids submitted were below what the lenders wanted.
"After negotiations with bidders, there was little scope for any increase," the source told the newspaper. "More importantly, both bids were dependent on the ongoing arbitration claims in Singapore which the lenders themselves are eyeing, so there is no point in dragging on this process now."
Shortly after it stopped flying, Go First sued Pratt & Whitney, accusing it of supplying faulty engines and not replacing them in a timely manner. Around half the airline's fleet was grounded when operations ended, and Go First claims the engine issues caused the bankruptcy.
"Creditors expect more than USD1 billion from the arbitration, which is close to INR8.5 billion [USD102 million] in today's prices," the source said. "Yes, there is a risk that the arbitration may not go the airline's way or Pratt & Whitney itself may not be able to fulfil the claims, but this is now an all-or-nothing call."
Contrasting with that potential pot of money, Sky One Aviation's bid was for INR7.35 billion (USD88 million) upfront in cash plus up to 20% of the lawsuit's proceeds, while Singh had offered to pay INR6.5 billion (USD77.7 million) over 12 months plus 10% of the lawsuit's proceeds.
The COC also wants to sell a 94-acre parcel of land near Mumbai, which it expects will fetch almost INR20 billion (USD239 million). The lenders taking the liquidation proposal to the upcoming meeting argue that pursuing the lawsuit and selling the land will yield a more profitable outcome than selling Go First at a large discount.
The COC meeting is expected within the week. They must decide on Go First's future by August 3, when the official Corporate Insolvency Resolution Process ends. The deadline has been extended on several occasions, but the courts have warned there will be no more extensions.
