Fate of Rs 6k crore Go First loans to be decided in a month

MUMBAI:  The fate of Rs 6,000 crore loans given by banks to Go First airline will be decided soon as the lenders are expected to take a decision within a month to classify their loans to the cash-strapped airline as non-performing assets (NPA).

Public sector lender Bank of Baroda has made a provision of Rs 500 crore in the current for its exposure to the troubled airline, said Sanjiv Chadha, managing director and chief executive officer of the bank. The bank has an exposure of about Rs 1,400 crore to Wadia group-owned Go First.

“A good portion of our exposure to the airline is covered. The Committee of Creditors (CoC) will have to meet to discuss the status of banks’ exposure to the airline. As of now, it is a standard account and within a month we will have to take calls regarding this exposure,” Joydeep Dutta Roy, executive director, of Bank of Baroda, told this newspaper.

Go First, which has sought bankruptcy protection after the National Company Law Tribunal (NCLT) admitted its plea for voluntary insolvency, owes over Rs 6,000 crore to four lenders. Central Bank of India has the highest exposure of Rs 2,000 crore, Deutsche Bank has Rs 1,320 crore exposure while IDBI Banks’ exposure to the airline is Rs 50 crore.

“So far the airline has not reached us and we are waiting for communication from the IRP (Interim Resolution Professional). The meeting of CoC is expected after May 22,” a senior official of the Central Bank of India told this newspaper.

The decision to classify a loan as NPA is decided by the bank individually but in the case of Go First, lenders will take this call in the meeting of the CoC. A loan is classified as NPA when its principal or interest payment remains overdue for a period of 90 days. If the lenders decide to classify Go First loans as NPA, it will close the doors for the airline for further funding from the lenders.

As per sources, exposure of banks to Go First is likely to be classified as NPA as Go First is struggling for resources after it halted its operations. They do not expect a quick turnaround in the airline’s operations. Lenders have also turned cautious and are unlikely to lend further to the airline.

On May 10, the NCLT admitted Go First’s plea for voluntary insolvency and admitted the initiation of Corporate Insolvency Resolution Process (CIRP) proceedings. NCLT has granted Go First protection under a moratorium from recovery by lessors and lenders. In total, the airline’s total liabilities to creditors stand at Rs 11,463 crore, including dues to banks, financial institutions, vendors and aircraft lessors.

Banks’ loans to Go First

Rs 1,430 Crore: Exposure of Bank of Baroda to Go First

Rs 500 Crore: Provision made by Bank of Baroda for its exposure to Go First

Rs 2,000 Cr: Exposure of Central Bank of India to Go First

Rs 1,320 Cr: Deutsche Bank’s exposure to Go First

Loans are classified as NPAs if they are overdue by over 90 days