Irish-based aircraft lessor gets court approval for creditor scheme

The High Court has given Irish-based aircraft lessor, Nordic Aviation Capital, the go ahead to seek to enter into a scheme of arrangement with its creditors.

Nordic Aviation Capital DAC wants to enter into a scheme with its lenders due to the dire effects of the Covid-19 pandemic on the aviation industry, the court heard.

If approved, the scheme of arrangement will secure a six to 12-month standstill on millions of euro in principal and interest payments due by the company to its lenders on over €5 billion of debt and allow the group to continue to operate.

The Nordic group of companies owns about 500 aircraft. It is the largest lessor of aircraft to regional airlines, the fifth largest aircraft lessor in the world and employs more than 100 people at its Limerick headquarters.

Seeking various orders under the Companies Act on Tuesday, Lyndon MacCann SC, with Kelly Smith, for Nordic Aviation Capital, said the pandemic has had a significant impact on the group’s business and about 65 of the group’s 75 customers are seeking various concessions on leasing agreements.

There has been a substantial decrease in the amount of money paid to the group, the court heared. In April, it only collected 20 per cent of sums due from airlines that leased its aircraft and it is estimated cash collections for June and July will also be very poor.

Counsel said the group fears it will run out of cash in July and that it could breach agreements concerning repayments to its creditors by the end of the month. As a result, the group wants to enter into a scheme of arrangement with its creditors, he said.

First estimate

The application came as the International Air Transport Association on Tuesday predicted airlines will lose a combined $84 billion this year and almost $16 billion in 2021, its first estimate of the hit to earnings since the Covid-19 crisis began. That compares with $31 billion during the 2008-2009 recession.

The grim forecast comes as airlines seek to gradually restart operations with the pandemic beginning to recede.

Industry debt has jumped by about $120 billion, a level many carriers will be unable to sustain without governments stepping in to convert borrowing into equity, the trade body said. The alternative to a rise in state ownership would be mass bankruptcies, it said.

Counsel for Nordic Aviation Capital said other parts of the proposed scheme include that shareholders will inject a total of $60 million (€53 million) into the group, which will reduce non-essential expenditure, and cut costs.

For the duration of the pandemic, it also proposes to eliminate an uncommitted proposed capital expenditure programme for 2020 to 2025 of $5.7 billion; to secure deferred payments under a committed capital expenditure programme of $1.5 billion and reduce the proposed delivery of 21 new aircraft down to eight.

It would be “ominous” for the company unless the scheme could be agreed, counsel said.

Mr Justice David Barniville made orders admitting the company's proceedings to the fast track Commercial Court list and formally gave it permission to convene meetings with its creditors.

The application was made on an ex-parte basis, one side only represented, but several of Nordic’s creditors had representatives in the courtroom observing the proceedings.

Brian Kennedy SC said he represented a group which holds 69 per cent of the lessor's unsecured debt. While his clients had no right to be heard during the application on Tuesday, they are opposing the proposed scheme, counsel said. – Additional reporting, Reuters