Go First's bank loans to be classified as "bad", but has strong collaterals - sources

Lenders to Go Airlines will classify their loans to the company as "non performing" in the current quarter, but are hopeful that the collateral backing the credit would reduce the amount of haircut they have to take, two banking sources said on Thursday. The low-cost carrier was granted bankruptcy protection by a company court on Wednesday, which also halted repossession of planes by lessors. "As per norms, the account will have to be declared a non-performing asset in the current quarter, and that will be done," one of the bankers said. "The account will also have to be provided for." The bankers did not wish to be named because they are not authorised to speak to media. The Indian central bank's rules for handling substandard assets says banks have to provision for at least 15% of total outstanding loans on secured assets in the first 12 months. The Go First bankruptcy filing lists Central Bank of India, Bank of Baroda, IDBI Bank and Deutsche Bank among its financial creditors, which are owed 65.21b rupees ($797.38m) in total. Central Bank of India has some of the largest exposures to the airline, of 13.05b rupees at the end of March, or 0.91% of total advances, with an additional 6.82b sanctioned under a government-backed emergency credit guarantee scheme. Total debt under the consortium's lending was worth 26.50b rupees, extended by the three Indian banks, as per a court filing. A piece of land owned by the promoters of Go First, documentation for which were in order, acts as a collateral for that amount, the second banker said.<br/>