Go First (Mumbai International) may face a forensic audit of its accounts if creditor banks decide to see whether there was any diversion of funds before the airline applied for voluntary administration. Financial institutions have met with Go First seeking to know why it "unilaterally" filed for insolvency, given it had not defaulted on any repayments. Reportedly, the banks did not receive a satisfactory response.
"Now that the resolution professional has been appointed, he will conduct a transaction audit, which is mandatory. Once the transaction audit is completed, lenders could go for a forensic audit of the airline’s book. Lenders are likely to take a call on this in a week’s time," an unnamed person close to proceedings told The Indian Express outlet. If any diversion of funds did happen, it may constitute a violation of the bank's lending terms and/or Reserve Bank of India rules.
Late last week, India's National Company Law Tribunal (NCLT) approved the appointment of Shailendra Ajmera as the permanent resolution professional. Ajmera is a partner at EY and sits on the Insolvency and Bankruptcy Board of India. Ajmera will work with and was requested by the Go First Committee of Creditors (CoC). J. Sagar Associates (JSA Law), a well-regarded Indian law firm, has been appointed as the CoC's legal advisors.
The Bank of Baroda, Central Bank of India, IDBI Bank, and Deutsche Bank, are among the most exposed financial institutions and are reportedly readying to put Go First into the non-performing asset basket next quarter. The Central Bank of India says its total exposure to Go First is INR19.87 billion (USD242.3 million), while the Bank of Baroda reports a total exposure of INR13 billion (USD158.6 million). Around INR10 billion (USD122 million) of the Bank of Baroda's loans are collateralized against tangible assets and/or corporate guarantees. In total, Go First owes lenders INR65.21 billion (USD795.3 million).
Ajmera will submit a new revival plan to the CoC and India's Directorate General of Civil Aviation (DGCA) after determining the funding needed to relaunch the airline. Go First has requested funding of INR4 billion rupees (USD48.8 million) to get up to 26 aircraft back into the air.
Go First has approximately INR2 billion (USD24.4 million) in undrawn credit under the Indian government's Emergency Credit Line Guarantee Scheme. Under the scheme, banks provide the funding, which is 100% guaranteed by the National Credit Guarantee Trustee Company (NCGTC). It is now uncertain whether the NCGTC will provide that guarantee regarding Go First, meaning banks may not let the airline tap the credit line. However, the CoC, which is next meeting on June 21, is believed to be broadly supportive of Go First resuming operations and providing funding sufficient to get 12 - 15 aircraft flying, later increasing to around 23 aircraft.
Meanwhile, Go First has again cancelled a raft of flights, this time until June 22. The airline has reportedly told lenders that it can have two aircraft in the air within 48 hours of receiving approval to resume flights, and quickly roll out additional aircraft after that. Initially, Go First intends to focus on the Leh Kushok Bakula Rimpochee, Chandigarh, Thoise, and Srinagar routes.
