Indian Oil To Retrieve Go First's Dues By Encashing Bank Guarantees

Indian Oil Corp will recover $61.14 million in jet fuel sales to cash-strapped Go First by cashing in bank guarantees, and it is hopeful that it will also recover $6.11 million in recent unsecured sales, according to Reuters.

On Tuesday, Go First, a budget airline that filed for bankruptcy protection, stated that it had procured all of its jet fuel from IOC, the largest fuel supplier in the country. The airline claimed that the grounding of nearly half of its planes was due to "faulty" Pratt & Whitney engines.

The bank guarantees of purchasers are frequently employed by Indian retailers to support their sales of aviation fuel to airlines.

"IOC has already approached the banks for encashment of bank guarantees of 5 billion rupees($61.14 million) and that has been accepted by the banks," said one of the sources.

The state-owned Bank of Baroda and Central Bank of India issued bank guarantees. However, over the last 2-3 months, Indian Oil Corporation (IOC) reportedly sold jet fuel to Go First worth around $6.11 million after the airline exceeded its credit limit, without any bank guarantees.

It is uncertain why Indian Oil continued to supply fuel to Go First without bank guarantees. The recovery of the outstanding amount of $6.11 million remains hopeful, as per Reuters report.

"It is not a governance issue that has led to this bankruptcy, it is the issue of engines that has not been attended to. So we are hopeful of recovering the dues."

Despite requests for comments, IOC, Bank of Baroda, and Central Bank of India, along with Go First, did not provide any response.

According to the company's bankruptcy filing on Tuesday with the National Company Law Tribunal, Go First reported a total debt of 65.21 billion rupees owed to financial creditors as of April 28. As of April 30, the company had not defaulted on any of the financial dues, but it had defaulted on payments to operational creditors. This includes 12.02 billion rupees owed to vendors and 26.60 billion rupees owed to aircraft lessors, as stated in the filing. ($1 = 81.7750 Indian rupees)