Norwegian Air secures court protection over €4.1bn debts

Norwegian Air Shuttle secured a crucial lifeline on Monday when the High Court granted the embattled carrier and five Irish subsidiaries protection from creditors.

Mr Justice Michael Quinn confirmed the appointment of Kieran Wallace of KPMG as examiner to Irish-registered Norwegian Air International, Arctic Aviation Assets DAC, Drammensfjorden Leasing, Torskefjorden Leasing and Lysakerjorden Leasing.

He also appointed Mr Wallace as examiner to their parent, Oslo-based Norwegian Air Shuttle (NAS), which guarantees those companies’ debts, and continued protection from creditors granted to the group last month.

Norwegian owes creditors, mainly aircraft lessors and banks, more than $5 billion (€4.1 billion) in total, while it faces running out of cash early next year.

Last month the airline and its five subsidiaries sought provisional protection in the High Court to facilitate the group’s restructuring, as its 140 aircraft are held by companies based in the Republic.

Rescue plan

The ruling gives Mr Wallace up to 100 days to come up with a rescue plan for the airline and the Irish companies. The judge noted that an independent expert's report by Ken Fennell, partner in Deloitte's Dublin office, found that the companies had a reasonable prospect of survival, if several steps, including getting court protection, were taken.

Arctic Aviation and the three leasing companies hold 72 of the group’s aircraft. The five Irish companies between them owe creditors a total of $4.6 billion.

The companies' senior counsel, Brian Kennedy, argued that the court could also appoint Mr Wallace as examiner to Oslo-based NAS as it had a sufficiently close connection to the Irish subsidiaries and could be wound up here.

Mr Justice Quinn agreed that it was “appropriate to appoint the examiner both in relation to the five petitioning companies and to the related company NAS”.

Mr Kennedy also indicated that NAS could take parallel proceedings in Norway’s courts to guarantee protection against claims from smaller local creditors. However, he stressed that the Irish examinership would take precedence over this.

English law governs most of the companies' agreements with their creditors. Mr Kennedy said that Daniel Bayfield QC had advised that, if requested, the English courts were likely to recognise the examinership and uphold the stay on creditors enforcing their debts.

US aircraft lessor Aviation Capital Group recently got a judgement in the English High Court for $6.3 million for rent due on Boeing 737s.

Dublin-based Goshawk issued a demand to Lysakerfjorden Leasing for $2.2 million due against another Boeing craft in October, a move that could spark legal action.

Lawyers for both creditors told the court they were neutral about Monday’s application.

Rossa Fanning SC said aircraft financiers, Dublin-headquartered Aercap and Bank of China Aviation, were also neutral. Both swapped debt for shares in Norwegian in an earlier restructuring in May.

Mr Fanning also represents several other key creditors, including the Export Import Bank of the United States, which has given export credit guarantees to Boeing. He pointed out that Norwegian owed the US institution $46 million, while the carrier's potential liability could run into the hundreds of millions, tied to ten 737s and three 787s.

Mr Fanning noted that all his clients had a “significant interest” in the examinership. “They have elected to adopt a position of neutrality; that does not mean they are indifferent,” he warned. He argued that, as Norwegian’s examinership was large and complex, it would need more court supervision and case management than usual.

Creditors seeking a further $28 million in liabilities, including passenger refunds for flights cancelled earlier this year, have emerged since the Norwegian Air companies were granted provisional protection. The issue is due back in court on December 18th.