The High Court sanctioned Nordic Aviation Capital Designated Activity Company’s amended scheme of arrangement with creditors, approving a year-long package of debt deferrals and waivers intended to help the aircraft lessor manage the impact of the COVID-19 pandemic.
Mr Justice David Barniville gave the ruling at a hearing on 21 July 2020 and set out his reasons in a written judgment delivered on 11 September. The court’s order was made under section 453(2) of the Companies Act 2014. It also issued a certificate that it had jurisdiction under specified provisions of the Brussels Recast Regulation.
The scheme applied to secured and unsecured creditors. It deferred principal, interest and certain final maturity payments, and waived enforcement events for the period from 30 June 2020 to 30 June 2021. Its terms also included a US$60 million equity injection from the company’s parent and other measures. The court’s judgment describes the scheme’s terms and its sanction; it does not set out a finding that the aviation market had recovered or that every anticipated risk had occurred.
The company’s evidence was that the pandemic had sharply reduced airline payments. Sixty-five of its 75 customers had requested lease concessions, and it collected 23% of billed payments in April, 20% in May and 34% in June 2020. The company said it anticipated potential covenant breaches and a cash shortfall by the end of July if the restructuring did not take effect. The judge recorded that this evidence was uncontested and accepted it.
Creditors approved the amended scheme unanimously among those present and voting at meetings on 9 July. Those voters represented 98% by value of unsecured creditors and 91% by value of secured creditors. The court found that the creditor classes were properly constituted, notice and statutory requirements had been met, and there had been no improper coercion. It concluded that the scheme was fair and equitable and that a creditor acting honestly and in their own interests could reasonably approve it.
The judgment also addressed releases benefiting other companies in the group and finance lessors. The judge held that those provisions did not deprive the court of jurisdiction, finding a sufficient connection between the releases and the creditor relationship with the scheme company. He also concluded that the scheme was likely to be recognised in relevant jurisdictions, noting that it had since been recognised in the United States under Chapter 15.
The court did not decide whether the Cape Town Convention or Aircraft Protocol applied. The judge said that issue was unnecessary to resolve because creditors, including represented secured creditors, were not opposing the scheme on that basis.