Airline Weekly

Nordic Aviation Capital First Major Lessor to Restructure Due to Pandemic

Nordic Aviation Capital (NAC) became the first major leasing company to restructure owing to the Covid-19 pandemic. The lessor has filed four separate U.S. Chapter 11 bankruptcy cases covering its core business and three affiliates.

The Ireland-based lessor has reached agreements with the majority of its creditors to slash its commitments in half to just over $4 billion from $8 billion through its restructuring, according to documents filed with the Bankruptcy Court for the Eastern District of Virginia on Monday. In addition, NAC would raise $537 million in new capital, split between $337 million in equity and a $200 million revolving credit facility, as part of its restructuring plan. The lessor has already lined up $170 million in debtor-in-possession financing.

NAC’s plan has the backing of its shareholders, and the holders of 73 percent of its $6.3 billion in outstanding debt, according to the filing. Creditors that support the plan include its single largest creditor, Danish pension fund PFA Pension, with a nearly $523 million unsecured claim, and Export Development Canada with almost $347 million in secured claims.

And, if all goes according to plan, NAC could exit bankruptcy within 150 days — or by May 2022 — under its pre-filing agreements.

NAC’s bankruptcy comes as most aircraft lessors have seen a surge in interest from airlines’ looking to finance or refinancing their fleets. Executives are Air Lease Corp. and AerCap have both reported strong demand for narrowbodies from airlines in recent months. And many, including ALC’s Executive Chairman Steven Udvar-Hazy, have said lessors stand to increase their share of global airline fleets coming out of the pandemic.

NAC puts firm blame for its Chapter 11 restructuring on Covid-19, and the Delta and Omicron variants. Since the beginning of the pandemic in March 2020, more than 65 percent of the lessor’s customers have requested lease concessions — either reduced payments or standstills — with new agreements reached covering 95 aircraft to date. Two customers, Alitalia and Stobart Air, have closed their doors entirely, and at least three more are undergoing major reorganizations, including Aeromexico, China’s HNA Group, and Philippine Airlines.

“NAC’s customers are facing severe liquidity issues, and, simply put, NAC cannot collect cash that its customers do not have,” said Justin Bickle, non-executive vice-chair of the lessor’s board, in a court filing on Monday. The lessor lost $2.4 billion during the fiscal year ending in June, and $639 million during the fiscal year ending June 30, 2020.

The lessor names the Omicron variant, which was identified at the end of November, as the latest blow to its business. Nearly a quarter of the lessor’s customers are in Southern Africa, where travel has been greatly restricted since the emergence of the latest variant.

Under NAC’s restructuring plan, the lessor will “retain their position as the preeminent regional aircraft lessor in the world,” said Bickle. The lessor owns and manages a fleet of 475 regional aircraft, including 285 turboprops and 190 regional jets, leased to 75 airlines around the world. The plan makes no mention of NAC’s outstanding aircraft commitments with Airbus and ATR, including for 20 Airbus A220s.

An initial hearing with the Eastern District of Virginia bankruptcy court is scheduled for December 21.

Up Next

AW Daily

Aeromexico Awaits U.S. and Mexico Agreement Over ‘Differences’ in Safety Rating Upgrade

Aeromexico is eager to add new U.S. flights and destinations and resume its close partnership with Delta Air Lines, all of which were key elements of its Chapter 11 restructuring that concluded last year. But it can do none of those things until the U.S. and Mexican governments come to an agreement over "differences" in…

AW Daily

Airline Execs Dismiss Slowdown Fears, Say It is ‘Best Recession’ Industry Ever Faced

Business is good for airlines, except where it's not. That was the word in the halls and meeting rooms of the industry's largest annual gathering, the IATA Annual General Meeting, this week. The organization has upped its airline financial outlook for the year to $22.4 billion in operating profits, a seven-fold increase from the $3.2…

AW Daily

Emirates President Says Airlines Must ‘Do Better’ to Develop Sustainable Fuels, Meet Climate Goals

Emirates President Tim Clark called for the airline industry to "do better" and put more money towards the development of sustainable aviation fuels as part of the global push to decarbonize commercial aviation. "If we rely on government, if we rely on other entities to do things, we may be waiting a long time," Clark…

AW Daily

Turkish Airlines Maintains Bullish Growth Objectives Despite Aircraft Order Delay

A delay to the plan by Turkish Airlines to acquire 600 new aircraft has not dampened its ambitious growth objectives, including an intention to add numerous new destinations around the world and spin off budget subsidiary Anadolujet. The Star Alliance carrier postponed by two months the order that will be split between Airbus and Boeing…

AW Daily

ANA Gains Traffic From U.S.-China Dispute Over Nonstop Flights

Japan's All Nippon Airways has seen a jump in passengers traveling between the U.S. and China as geopolitical tension keeps nonstop flights between the two countries at historic lows. ANA is seeing "new demand" from travelers who transit its Tokyo hubs on trips between the U.S. and China, President and CEO Shinichi Inoue said at…

Exit mobile version