Indian Oil to encash bank guarantees to recover Go First dues
Sources report that Indian Oil Corp is set to recover $61.14 million owed to them by Go First for jet fuel sales. This will be achieved by cashing in the bank guarantees provided by the cash-strapped airline. Furthermore, IOC is hopeful that they will recover an additional $6.11 million owed to them for unsecured sales made by Go First in recent months.
As the country’s largest fuel retailer, IOC was the sole supplier of jet fuel to Go First, a low-cost carrier that recently filed for bankruptcy protection. The airline cited “faulty” Pratt & Whitney engines as the reason for grounding about half its fleet. Typically, Indian fuel retailers require bank guarantees from buyers to back up their jet fuel sales to airlines.
Indian Oil
According to one source, the banks have accepted the encashment of bank guarantees worth 5 billion rupees ($61.14 million) that were previously approached by the Indian Oil Corporation (IOC).
The bank guarantees were issued by the Bank of Baroda and the Central Bank of India, as stated by another source. However, in the past two to three months, IOC sold jet fuel worth approximately 500 million rupees ($6.11 million), to Go First without bank guarantees, after the airline had reached its credit limit.
It remains unclear why the state-run Indian Oil continued to sell fuel to Go First without bank guarantees. Despite this, the first source expressed hope that IOC would recover the outstanding 500 million rupees.
They explained that the bankruptcy was not due to a governance issue but rather the unaddressed issue of engines. As a result, they are optimistic about the possibility of recovering the dues.
Requests for comments sent to IOC, Bank of Baroda, Central Bank of India, and Go First have not been answered.
According to a bankruptcy filing submitted to the National Company Law Tribunal on Tuesday. Go First stated that total debt of 65.21 billion rupees is owed to financial creditors as of April 28.
The company had not yet defaulted on any of these outstanding debts as of April 30. However, it had defaulted on payments to operational creditors, including 12.02 billion rupees to vendors and 26.60 billion rupees to aircraft lessors, as stated in the filing. ($1 = 81.7750 Indian rupees)
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