Nordic Aviation Capital Designated Activity Company v The Companies Act 2014 to 2018

JurisdictionIreland
CourtHigh Court
JudgeMr. Justice David Barniville
Judgment Date11 September 2020
Neutral Citation[2020] IEHC 445
Date11 September 2020
Docket Number[2020 No. 162 COS.]

[2020] IEHC 445

THE HIGH COURT

COMMERCIAL

David Barniville

[2020 No. 162 COS.]

IN THE MATTER OF NORDIC AVIATION CAPITAL DESIGNATED ACTIVITY

COMPANY

AND

IN THE MATTER OF THE COMPANIES ACT 2014 TO 2018

AND

IN THE MATTER OF A PROPOSAL FOR A SCHEME OF ARRANGEMENT

PURSUANT TO PART 9, CHAPTER 1 OF THE COMPANIES ACT 2014 TO 2018

JUDGMENT of Mr. Justice David Barniville delivered on the 11 th day of September, 2020
Introduction
1

The applicant company, Nordic Aviation Capital Designated Activity Company (the “Scheme Company”), applied for orders under s. 453 of the Companies Act, 2014 (the “2014 Act”), sanctioning a proposed scheme of arrangement between the Company and certain of its creditors (the “Scheme Creditors”) and for various related orders.

2

The Scheme Company is a major aircraft leasing company based in Limerick whose business has been severely affected by the COVID-19 pandemic.

3

The proceedings first came before me on 9 th June, 2020 when the Scheme Company sought and obtained orders summoning meetings of the Scheme Creditors for the purpose of considering and voting on the scheme in the terms then being proposed. Various further orders were made in the course of the proceedings. The meetings of the Scheme Creditors proceeded on 9 th July, 2020 (having been adjourned from 24 th June, 2020). The scheme (in an amended form)(the “Amended Scheme) was unanimously approved at both meetings of the Scheme Creditors on 9 th July, 2020 (in value 98% of the unsecured creditors and 91% of the secured creditors attended and voted in favour of the Scheme at the respective Scheme meetings). I made further directions in relation to the sanction hearing on 10 th July, 2020.

4

The sanction hearing proceeded on 21 st July, 2020. Solicitors and counsel representing an ad hoc group of the secured creditors of the Scheme Company (representing just under 50% in value of the debt owed to the secured creditors) and two ad hoc groups of unsecured creditors appeared at the hearing and supported the Scheme Company's application for court sanction in respect of the Amended Scheme. Having had the opportunity of considering the papers in advance, and having heard counsel for the Scheme Company and counsel and solicitors for the Scheme Creditors who were represented at the hearing, and in light of the enormous urgency of the matter, I gave an ex tempore judgment immediately following the hearing. I made an order pursuant to s. 453(2) of the 2014 Act that the Amended Scheme be sanctioned and further directed pursuant to Article 53 of Regulation (EU) No. 1215/2012 (the “Brussels Recast Regulation”) that a certificate be issued certifying that the court had jurisdiction to hear and determine the application pursuant to Article 1(1), Article 4 and Article 8(1) of that Regulation.

5

While I provided my reasons for making these orders in my ex tempore judgment, I indicated that I would prepare a more detailed written judgment in due course having regard to some of the unusual aspects of the application, including the extensive ancillary releases of parties provided for in the Amended Scheme and the international jurisdictional issues which arose on the application and which had not been the subject of any previous judgment of the Irish courts. That is the purpose of this written judgment.

Factual Background
6

The factual background to the Scheme Company's application was set out in a very extensive grounding affidavit sworn on its behalf by Soren M. Overgaard, a director and Chief Executive of the Scheme Company, on 10 th July, 2020 (the “grounding affidavit”). There was no dispute between the parties in relation to the facts set out in that grounding affidavit. Several other affidavits were sworn in the course of the proceedings, and it will be necessary from time to time to refer to some of those affidavits in the course of this judgment.

The Scheme Company
7

The Scheme Company is an Irish incorporated company with its registered office in Limerick. The Scheme Company heads the Nordic Aviation Capital Group of companies (the “NAC Group”). The NAC Group has 138 subsidiaries operating in 16 countries across the world. Sixty-five of those subsidiaries are incorporated under the laws of Ireland. The NAC Group is the world's largest regional aircraft lessor and the fifth largest commercial aircraft lessor in terms of the number of aircraft held.

8

The NAC Group has built a leading platform specially designed to meet the needs of customers in the regional aircraft sector. That platform leverages the NAC Group's scale. state-of-the-art maintenance operations, long-standing client relationships and access to capital to efficiently locate new and secondary market aircraft acquisitions and facilitate a rapid return to service for redelivered aircraft. The NAC Group's business model maximizes the useful life of aircraft and leverages superior knowledge of regional aircraft assets and ability to evaluate maintenance status to efficiently trade aircraft in the secondary market.

The NAC Group's Fleet
9

As of 31 st March, 2020, the NAC Group's fleet consisted of 490 in-demand aircraft, with lease arrangements with 75 customers in 50 countries. Of these, 423 were leased, 31 were subject to a binding lease or letter of intent to lease between the NAC Group entities and a future lessee and 36 were Aircraft in Inventory (i.e. aircraft available for lease which were not currently subject to a binding lease or letter of intent).

10

The NAC Group's fleet is diversified across a variety of regional aircraft types, including ATR turboprops. Embraer regional jets and Bombardier aircraft (consisting of both turboprops and regional jets).

11

The NAC Group's aircraft are typically leased under operating leases, with agreements requiring the lessee to pay a monthly lease rental payment, and in many cases, include periodic payments for the maintenance of the aircraft (the “Supplemental Rent”) based on usage. The lessee is responsible for paying monthly rental costs under the agreement regardless of hours flown or whether the aircraft is in use. As a lessor, the NAC Group receives the lease revenue and Supplemental Rent and also assumes responsibility for extending the lease term or redeploying the aircraft after the lease term expires. In some cases, the NAC Group may choose to sell an aircraft instead of re-leasing it. In line with industry practice, the NAC Group's leases are denominated in US dollars, which is also the functional currency of the NAC Group. Customers of the NAC Group include major international airlines such as Garuda, Azul, LOT Polish Airlines, Air Canada, AeroMexico and Deutsche Lufthansa.

Financing of the NAC Group
12

The NAC Group has in place a range of financing arrangements (the “NAC Group Debt”). As at 31 st March, 2020, the NAC Group Debt was comprised of over 90 separate finance facilities, provided by over 85 different lenders, with a total sum of approximately US$5.923 billion advanced and outstanding under those facilities.

13

The NAC Group Debt can be separated into: -

(a) Unsecured debt in the sum of approximately US$3.697 billion (the “NAC Unsecured Debt”); and

(b) Secured debt in the sum of approximately US$2.226 billion (the “NAC Secured Debt”)(together these are referred to below as the “Financing Arrangements”).

14

The Scheme Company has guaranteed substantially all of the NAC Group Debt (which includes the payments under the finance leases). In addition, as explained below, pursuant to a Deed of Indemnity and Contribution dated 5 th June, 2020 (as amended on 2 nd July, 2020), the Scheme Company agreed to be liable as a primary obligor to the lenders under the Finance Lease Structures and the JOLCO Loan Agreements for any amount owing to them by the Finance Lessors and JOLCO Lessors (as those terms and arrangements are explained below).

15

NAC Aviation 29 Designated Activity Company (“NAC 29”) is an Irish incorporated Company, having its registered office in Limerick. The Scheme Company is the sole shareholder of NAC 29.

16

NAC 29 is the primary obligor for the vast majority of the NAC Unsecured Debt (the “NAC 29 Debt”), with the exception of one unsecured facility whereby the Scheme Company is the primary obligor. The Scheme Company, however, has guaranteed all of the NAC 29 Debt.

17

The respective unsecured facilities (and the corresponding guarantees given by the Scheme Company) for the NAC Unsecured Debt are governed by English, German or New York law.

18

The secured facilities utilise, principally, three different forms of finance structure, being (a) Direct Secured Facilities, (b) Finance Lease Structures and (c) JOLCO Facilities.

(a) Direct Secured Facilities

19

The Direct Secured Facilities comprise finance of certain direct and indirect wholly owned subsidiaries of the Scheme Company (the “NAC Subsidiaries”), incorporated in Ireland, Singapore or Denmark. Each of those NAC Subsidiaries has furnished security directly to the respective lenders (the “Secured Lenders”). The Scheme Company guaranteed all of the Direct Secured Debt advanced to the NAC Subsidiaries, not just as surety, but also as a primary obligor (the “Secured Debt Guarantees”). As support for certain of those Secured Debt Guarantees, the Scheme Company separately furnished security over its shares in the relevant NAC Subsidiary. The Direct Secured Facilities and the corresponding Secured Debt Guarantees are governed by English or New York law.

(b) Finance Lease. Structures

20

Some of the facilities that are governed by English or New York law are structured as a loan to an orphan special purpose vehicle (the “Lessor SPV”), which entered into a finance lease with the relevant NAC Group Company as finance lessee (the “NAC Lessee”). The payment obligations under the finance leases are guaranteed by the Scheme Company. The key structural features of this type of...

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1 cases
  • Arctic Aviation Assets Designated Activity Company
    • Ireland
    • High Court
    • 22 April 2021
    ...relevant by analogy. It is clear from the judgments of Barniville J. in Re Ballantyne [2019] IEHC 407 and Re Nordic Aviation Capital DAC [2020] IEHC 445 that the court has jurisdiction to confirm a scheme of arrangement which provides for the release of third party 159 In Re Ballantyne, Bar......

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