Arctic Aviation Assets Designated Activity Company

JurisdictionIreland
CourtHigh Court
JudgeMr. Justice Quinn
Judgment Date22 April 2021
Neutral Citation[2021] IEHC 272
Docket Number2020/366 COS
Date22 April 2021

[2021] IEHC 272

THE HIGH COURT

2020/366 COS

In the Matter of Arctic Aviation Assets Designated Activity Company

and

In the Matter of Norwegian Air International Limited

and

In the Matter of Drammensfjorden Leasing Limited

and

In the Matter of Torskefjorden Leasing Limited

and

In the Matter of Lysakerfjorden Leasing Limited

and

In the Matter of Part 10 of the Companies Act, 2014

and

In the Matter of Norwegian Air Shuttle ASA, As a Related Company within the Meaning of Section 517 and Section 2 (10) of the Companies Act, 2014, And in the Matter of the Companies Act, 2014

Scheme of arrangement – Proposals – Companies Act 2014 s. 541 – Examiner seeking an order confirming his proposals for a scheme of arrangement between each of the companies and their respective members and creditors – Whether the proposals were unfairly prejudicial to the interests of any interested party

Facts: The examiner, Mr Wallace, appointed to Arctic Aviation Assets DAC, Norwegian Air International Ltd, Drammensfjorden Leasing Ltd, Lysakerfjorden Leasing Ltd and Norwegian Air Shuttle ASA, applied to the High Court for an order pursuant to s. 541 of the Companies Act 2014 confirming his proposals for a scheme of arrangement between each of the companies and their respective members and creditors. The hearing of the application to confirm the proposals took place on 25 and 26 March, 2021. At the conclusion of the hearing, Quinn J delivered his ruling and confirmed the proposals pursuant to s. 541 (3). This judgment summarised the reasons for his decision to confirm the proposals.

Held by Quinn J that, having had regard to the evidence and the submissions of the examiner, he had concluded that: the proposals had been approved by the members of each of the companies; at least one class of creditors had approved the proposals; there was no suggestion that the sole or primary purpose of the proposals was the avoidance of payment of tax due or that the proposals had been put forward for any improper purpose; no irregularity had occurred in relation to any of the statutory meetings at which the proposals had been considered; the proposals were fair and equitable in relation to each class of creditors which had not accepted the proposals and whose interests or claims would be impaired by implementation; and the proposals were not unfairly prejudicial to the interests of any interested party. In the exceptional circumstances of this case, Quinn J accepted the evidence of the examiner and found that the evidence as to the prospect of securing the necessary investment was sufficiently compelling that he should confirm the proposals notwithstanding their conditionality. Quinn J was satisfied that if the proposals were confirmed and implemented, the restructuring thereby achieved would facilitate the ongoing survival of the companies as going concerns, and thereby achieve for members, creditors and others, including employees, an outcome more favourable than would arise if the companies were wound up.

Quinn J therefore made the order confirming the proposals in the form appended to the order made by him on 26 March, 2021.

Application granted.

Judgment of Mr. Justice Quinn delivered on the 22nd day of April, 2021 (Section 541)

1

This judgment relates to an application by the examiner appointed to the five companies named below for an order pursuant to s. 541 of the Companies Act 2014, (“the Act”), confirming his proposals for a scheme of arrangement between each of the companies and their respective members and creditors. The proposals relate to the following companies:-

  • • Arctic Aviation Assets DAC (“AAA”).

  • • Norwegian Air International Limited (“NAI”)

  • • Drammensfjorden Leasing Limited (“DLL”)

  • • Lysakerfjorden Leasing Limited (“LLL”)

  • • Norwegian Air Shuttle ASA (“NAS”)

2

I refer to the companies listed above as “the companies”. NAS is the parent company of the wider Norwegian Group to which I shall refer as “the Group”.

3

On 18 November, 2020, Kieran Wallace of KPMG Dublin was appointed interim examiner of the companies and of Torskefjorden Leasing Limited (“TLL”). By further order made on 7 December 2020, Mr. Wallace was appointed examiner of the companies and Torskefjorden Leasing Limited. The structure of the Group and the background to the appointments is described in my judgment in these proceedings delivered on 16 December, 2020, ( [2020] IEHC 664) (“the First Judgment”).

Liquidation of TLL
4

TLL was a company which focused on leasing wide-bodied aircraft suitable only for long haul flights. On 14 January, 2021, the companies made an announcement in relation to their business plan, a significant part of which was a decision that the Group would in the future focus on its core Nordic business, operating a European short-haul network with narrow-bodied aircraft. It had concluded that a long haul operation was no longer viable for the Group and therefore that long haul operations would cease.

5

On 15 January, 2021, the examiner made an application to the court seeking the removal of protection from TLL and an order winding up TLL. He reported that in light of the decision to cease offering long haul flights, he had formed the view that he was unable to formulate proposals for a scheme of arrangement in relation to TLL. Accordingly, this Court made an order on 15 January, 2021, lifting the protection of the court in relation to that company and an order for the winding-up of TLL.

The examiner's report
6

Section 534 of the Act requires that the examiner formulate proposals for a scheme of arrangement, hold meetings of members and creditors to consider the proposals, and report on the outcome of those meetings within 35 days after the date of his appointment, or such longer period as the court may allow. As permitted by s. 534, the court granted a number of extensions to the reporting time limit. A final extension was granted on 19 February, 2021, up to 16 April, 2021. The final extension was granted by reason of exceptional circumstances, as permitted by amendments to s. 534, made by s. 13 of the Companies ( Miscellaneous Provisions) (Covid-19) Act 2020, as updated by SI 672/2020.

7

The examiner convened the required meetings of members and creditors for each of the companies to consider and vote on the proposals. The meetings were held initially between 18 March, 2021, and 20 March, 2021, with certain inquorate meetings adjourned to 22 and 23 March, 2021.

8

On 22 March, 2021, the examiner delivered his report on the proposals in accordance with s. 534. The hearing of the application to confirm the proposals took place on 25 and 26 March, 2021. At the conclusion of the hearing, I delivered my ruling and confirmed the proposals pursuant to s. 541 (3). This judgment summarises the reasons for my decision to confirm the proposals.

9

The application to confirm the proposals was grounded on an affidavit sworn by the examiner on 22 March, 2014. To that affidavit there was exhibited the examiner's report pursuant to the provisions of s. 534 of the Act.

10

The examiner delivered a supplemental report on 23 March, 2021, in which he reported on the final outcome of all of the meetings of members and creditors including certain of the meetings which had been adjourned to 23 March, 2021.

11

The proposals were approved by the members of each of the companies.

12

The proposals were also approved by at least one class of creditors of each company.

13

At the confirmation hearing 24 notice parties, in addition to the companies themselves, were represented. The majority of those who were represented stated that they were participating in the hearing only as observers, and a number of those parties stated that they were neutral as regards confirmation of the proposals.

14

No party opposed confirmation of the proposals. Support for confirmation was stated on behalf of four creditors.

15

I shall return to the contents of the proposals as regards each of the companies. I propose to consider first the general evidence given by the examiner as regards the proposals and the investment arrangements intended to underpin the proposals.

Background
16

As described in my First Judgment, the perilous state of the companies' finances was largely attributable to two significant events in 2019 and 2020 respectively. The first of these was the grounding of all 18 of the Group's Boeing 737 Max 800 aircraft at the direction of the European Union Aviation Safety Agency after the Ethiopian Airlines and Lion Air crashes. Those aircraft remain grounded. The second event was the COVID-19 pandemic.

17

In early 2020 the Group embarked on a restructuring entailing significant cost reductions, and the raising of additional external working capital.

18

The 2020 restructuring plan included the conversion of a proportion of the Group's debt and leasing commitments to equity, and renegotiation of terms with lessors and financiers of aircraft. The Group reduced its active fleet to seven Boeing 737 – 800 aircraft operating solely on domestic routes within Norway, and postponed operations outside Norway pending the easing of travel restrictions necessitated by the pandemic.

19

Following the completion of the 2020 restructuring, the Group applied to access the Norwegian state aid package which consisted of a state loan guarantee package of NOK 3 billion (approximately €278 million).

20

On 9 November, 2020, the Norwegian government announced that it had declined to provide this further financial support to the Group. This announcement, combined with increased public health restrictions in the latter half of 2020 as a result of the pandemic placed the Group in a challenging situation both financially and operationally and ultimately led to the presentation of the petition for examinership.

21

The examiner's proposals are largely based on the companies' business plan and proposals to secure...

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