Indian Oil to recoup most dues for jet fuel sales from Go First through bank guarantees
(Reuters) - Indian Oil Corp will recoup $61.14 MM of jet fuel sales to cash-strapped Go First by cashing in bank guarantees and is optimistic it will recover a further $6.11 MM for unsecured sales made in the past few months, sources said.
IOC, the country's largest fuel retailer, was the sole supplier of jet fuel to low-cost carrier Go First, which filed for bankruptcy protection on Tuesday, blaming "faulty" Pratt & Whitney engines for the grounding of about half its fleet.
Jet fuel sales by Indian retailers to airlines are typically backed by bank guarantees provided by the buyers.
"IOC has already approached the banks for encashment of bank guarantees of ₹5 B and that has been accepted by the banks," said one of the sources.
Bank guarantees were issued by the state-run Bank of Baroda and Central Bank of India, a second source said.
However, in the last two-to-three months IOC sold jet fuel worth about ₹500 MM to Go First without any bank guarantees after the airline had used its credit limit, they said.
It is not clear why the state-run Indian Oil continued to sell fuel to Go First without bank guarantees.
The first source said IOC is hopeful of recovering the outstanding ₹500 MM.
"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."
IOC, Bank of Baroda, Central Bank of India and Go First did not respond to request for comments.
In a bankruptcy filing with the National Company Law Tribunal on Tuesday Go First said its total debt to financial creditors was ₹65.21 B as of April 28.
The company had not defaulted on any of those dues as of April 30, but had defaulted on payments to operational creditors, including ₹12.02 B to vendors and ₹26.60 B to aircraft lessors, it said in the filing.
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