SpiceJet, a low-cost carrier facing financial challenges, has shown interest in purchasing Go First, a bankrupt airline, to establish a sustainable airline through “a possible conjunction with Spicejet.” Go First is currently following the corporate insolvency resolution procedure (CIRP). SpiceJet disclosed in a regulatory filing that it has expressed interest in purchasing its voluntary declaration of insolvency in the first part of May.
In a Tuesday stock exchange filing, SpiceJet said, “Please note that SpiceJet Limited…has expressed interest with the Resolution Professional of Go First and wish to submit an offer post diligence, to create a strong and viable airline in a possible combination with SpiceJet.”
SpiceJet’s shares surged by almost 8% on the BSE after the company filed, reaching a 52-week high of Rs 69.20 before closing at Rs 66.08, up nearly 3% from the previous close.
SpiceJet continued, the company’s board recently approved and started raising an additional US$ 270 million to bolster its finances and provide funds for growth plans. This implies that the primary carrier might think about purchasing Go First with some of the additional funds it intends to raise.
In order to “fortify the airline’s financial strength and accelerate its growth trajectory,” SpiceJet announced last week that it would be issuing equity shares to financial institutions, high net worth individuals (HNIs), foreign institutional investors (FIIs), and private investors in order to raise an additional Rs 2,250 crore.
It is important to remember that SpiceJet has been experiencing financial difficulties and involved in legal disputes with creditors and aircraft lessors for a while. According to reports, this has affected operations, forcing the airline to postpone paying employees repeatedly. The airline converted over $100 million in lease rental dues into equity for aircraft lessor Carlyle Aviation, in addition to its recent decision to raise additional equity.
Go First’s resolution specialist, Shailendra Ajmera has reportedly asked SpiceJet to permit them to submit an EoI because the deadline has already passed. Reports state that Safrik, an investment firm emphasising Africa, and Sky One, an aviation company based in the United Arab Emirates, have also recently indicated interest in bidding for Go First. Although Jindal Power and Jettwings Airways had earlier filed expressions of interest (EoI) to purchase Go First, they still need to submit a formal bid by the deadline of November 22. Go First has been facing liquidation by its lenders due to the lack of interest from investors.
Low on funds Go First blamed engine maker Pratt & Whitney (P&W) for the financial crisis when it announced on May 2 that it would file for voluntary insolvency with the National Company Law Tribunal (NCLT). The airline claimed that it was “forced to apply to the NCLT” as a result of the grounding of 25 aircraft, or half of its fleet of Airbus A320neo aircraft, and severe financial hardship brought on by “the ever-increasing number of failing engines supplied by Pratt & Whitney’s International Aero Engines.” Beginning on May 3, Go First cancelled all of its flights; it has yet to start operating again.
Go First stated in its first filing with the NCLT that it owed Rs 6,521 crore to financial creditors, including the Central Bank of India, Bank of Baroda, IDBI Bank, and Deutsche Bank. Even though the carrier didn’t start missing payments until April 30, it told the NCLT that defaults were “imminent” given its current financial situation. Nonetheless, the airline should have paid more to operational creditors, such as vendors, who received Rs 1,202 crore and aircraft lessors, who received Rs 2,660 crore.