Go First had ‘disproportionate liabilities, substantial dues’: IRP tells NCLT

The interim resolution specialist (IRP) for Go First’s bankruptcy told the National Company Law Tribunal (NCLT) that the airline had “disproportionate liabilities and substantial receivables”.

Liabilities of the airline as of April 28, 2023 increased by about Rs. 3,500 crore in just one year, documents reviewed by business line show up. Its total exposure to operating and financial creditors is Rs.11,463 crore.

Consequences of “fear”

According to documents Go First filed with NCLT, which have not been made public, the IRP said the company also feared that lessors and other creditors would require bank guarantees (BG) and standby letter of credit (SBLC) along with aircraft repossession; Consequently, the airline filed for bankruptcy.

In its written letter to the NCLT, the IRP said, “The company is not in default today with any financial creditors.” However, due to the substantial long-term grounding of its aircraft due to operational difficulties, “the company has accumulated disproportionate liabilities, including those to aircraft lessors”.

He added that, as was evident from the company’s operating accounts, “there is a very high probability that, given the significant delay in payments, lessors and other creditors secured by the SBLCs and BGs issued to them by the company, will claim them. The company is operating anyway at a reduced capacity and is not left with Sufficient resources to pay operating costs and delinquent creditors and facilitate the potential debt spillover of approved and construction firms.”

This letter is attached to the company’s insolvency petition to NCLT.

According to the petition, as of 28 April 2023, the non-current liabilities of the company increased to ₹ 14,018.69 crores from ₹ 11,724.53 crores in FY22 and ₹10,488.88 crores in FY21. Similarly, its current liabilities increased from ₹ 6,330.41 crores in 2021 to ₹8,113.98 crores in FY22 and to ₹8,578.27 crores as of 28th April.