Earlier today, on May 26, 2021, the final condition of the Norwegian Air Shuttle Group’s restructuring plan was met, allowing the examiner’s program to become effective: confirmation that the company has succeeded in raising $ 6 billion. from NOK.
The resulting “New Norwegian” sees a significant reduction in its operations and significant changes in its capital structure, including: (i) a reorientation towards the Nordic market; (ii) the cessation of the Norwegian group’s long-haul activities; (iii) a reduction of its fleet from 140 to c. 50 aircraft (now using only narrow-body aircraft (787-800)); (iv) new hourly electricity rental contracts until March 2022; (v) downsizing to c. 2,800; and (vi) reduction in aircraft debt by c. 85%, that is to say a total indebtedness of the group of less than 20 billion NK (approximately 2 billion euros).
The ALG Aviation Finance and Restructuring groups worked closely to advise a number of NAS creditors during the review. There have only been two airline reviewers before the Irish High Court before Norwegian. The case was therefore closely followed by the aviation community around the world. Here is an overview of the main points arising from this restructuring:
- Irish judges continue to endorse Dublin as a key location for restructuring:
The manner in which the case was handled and the outcome of the key requests are further evidence of the expertise of the Irish judiciary and their willingness to endorse the use of both reviews and settlement schemes to bring about many complex and cross-border restructurings in close collaboration. deadlines. The implementation of the restructuring of Norwegian through Examinership follows the success of the Irish Schemes of Arrangement involving Ballantyne Re (2019) and Nordic Aviation Capital (2020), as well as the restructuring of CityJet in August 2020 through a Examinership. ??
- Sufficient Connection Test Guidance for Non-Irish Companies Seeking to Access Exams as a ‘Linked Company’:
Five of the companies which sought protection from the Court were Irish incorporated and domiciled companies. One of the challenges facing the Norwegian Air Shuttle ASA (NAS) holding company, a Norwegian incorporated company, was that it had to enter the Irish review process for various operational and structural reasons. While it is generally accepted that the law contemplates that a non-Irish company may benefit from the Irish review process as a related company, it was the first significant non-Irish company to seek protection from the Court in an Irish review. Justice Quinn found that the business operations and range of legal transactions entered into by the Norwegian group were “so closely linked and interdependent that NAS has a real and deep connection” with Ireland. While the Court was prepared to allow a non-Irish company to benefit from the protection of the Court on this occasion, it is not clear whether a similar approach would be taken by the Court in another case, in the absence of the Court. level of interdependence with Irish companies, as demonstrated by NAS in this case. ??
- Ability to waive a wide range of examination obligations:
The Irish High Court has exercised its discretion to grant the companies’ request to repudiate a wide range of contracts, including: (i) operating contracts relating to ground handling and fuel line services; (ii) main leases with aircraft lessors and associated subleases; and (iii) the guarantees given by NAS or Arctic Aviation Assets DAC relating to the obligations of the OpCos within the Norwegian Group in favor of lessors or other financial parties. Although various counterparties objected, the Court ultimately concluded that the termination of the contracts was necessary to allow the Examiner to formulate proposals aimed at facilitating the survival of the group. This means that if a practicing company (with the support of the examiner) can demonstrate that it has shared enough information with the relevant counterparty (and the Court) to demonstrate the necessity of repudiation, the Court is likely to access the request. .
It was also the first Examinership in which the guarantees were rejected. It reflects the Court’s desire to take a broad approach to the types of contracts that can be terminated, assuming that the examiner and the company can demonstrate that such an approach is necessary to facilitate the survival of the companies in question. However, the court concluded that it should hold a hearing to determine the quantification of the damages flowing from the repudiation order. Although in the end it was not necessary in this review, as the creditors and the company had reached an agreement on the quantum, the Court was persuaded (in this case) that it should not allow that the quantification of damages is suspended and processed by an expert appointed to deal with unsuccessful claims under the Examiner’s proposals.
- The rights of the Cape Town Convention Protocol apply to examinations:
While the question of whether a system of arrangement is “insolvency proceeding” within the meaning of the Cape Town Convention remains unclear, it seems increasingly clear that the review function will be accepted by Irish courts as a matter of course. “Insolvency proceedings” for these purposes. This means that the protections set out in the Protocol to the Cape Town Convention on Specific Matters of Aircraft Equipment (the Aircraft Protocol) should apply in the context of a review of a CTC “debtor” so that : (i) any obligation of the CTC debtor under the relevant lease or guarantee agreement may be changed without the consent of the relevant CTC creditor; and (ii) no exercise of remedies permitted by the Cape Town Convention (including repossession) may be prevented or delayed after the end of the 60 day waiting period.
- The review operates as a pilot process with ancillary foreign restructuring processes:
It became clear at the start of the review that the holding company, NAS, would need support from the local Norwegian reconstruction process, mainly due to a lack of recognition by local law of foreign insolvency processes. The Norwegian examiner and reconstructor worked closely together to ensure that the processes worked in tandem and that what was done in one jurisdiction did not overlap with the other. The Irish Court agreed that the Examiner should be the main restructuring process and, critically, agreed to postpone the effective date of the Examiner’s program until: (i) the process reconstruction is approved in Norway and (ii) the group’s capital increase is successfully concluded.
The withdrawal of the United Kingdom from the European Union and the automatic recognition regime under the European Insolvency Recast Regulation did not prevent the effect of the examiner in circumstances where the Court was satisfied that the repudiation of contracts governed by English law and the examiner’s regime would be recognized in England under section 426 of the UK Insolvency Act 1986. Recognition was also sought and obtained under US Chapter 15.