Norwegian Air’s Irish subsidiaries subject to legal action
Creditors took or threatened action against two companies before court protection granted
Norwegian Air’s key Irish subsidiaries got High Court protection from creditors on Wednesday in the latest bid to rescue the troubled Scandinavian airline group. Photograph: Toms Kalnins/EPA
Creditors took or threatened legal action against two of troubled airline Norwegian Air Shuttle’s Irish subsidiaries before those companies got court protection last week.
Mr Justice Michael Quinn granted Oslo-based Norwegian Air, and five Irish-based subsidiaries that are critical to its business, interim protection from creditors last week in the latest bid to rescue the Scandinavian group.
Documents show that this month, the British high court ordered one of the Irish companies, Drammensfjorden Leasing, and its parent, Norwegian Air Shuttle, to pay $6.3 million (€5.3 million) to aircraft leasing firm Aviation Capital Group and one of its subsidiaries.
According to an independent expert’s report on the Norwegian Air companies written by Ken Fennell, a partner in accountancy firm Deloitte’s Dublin office, Drammensfjorden holds 20 of Norwegian Air’s Boeing 737-800 aircraft.
Wings Capital Partners, which manages leases over two of the Boeings held by Drammensfjorden, recently issued notices of default and demands for payment of $5.9 million.
Mr Fennell’s report states that the notices say failure to pay will trigger repossession of the aircraft and a $15 million compensation demand.
Demands for payment can result in litigation if they are not met. The report classes Wings Capital’s and Goshawk’s notices as threatened litigation.
That order includes their ultimate parent, Oslo-based Norwegian Air Shuttle, which also sought protection as it guarantees its subsidiaries’ debts.
Norwegian turned to the Irish High Court as group companies registered in the Republic hold its aircraft and help finance its operations.
The three leasing companies are subsidiaries of Arctic Aviation. They own 72 of the Scandinavian airline’s 140 aircraft. The Irish-registered entities under the court’s protection owe creditors $4.6 billion.
NAI is an operating company, which holds an airline licence allowing the group to operate in the European Union. Arctic and its subsidiaries are finance companies that own and lease aircraft to NAI and other group operating businesses.
Norwegian Air Shuttle sells the flights and provides cash to its operating and finance subsidiaries as they need it.
Irish leasing giant Aercap is listed among those creditors. That company took shares in Norwegian in lieu of debt in a restructuring in May. On Tuesday, it announced that it cut its stake to 9 per cent from 13.4 per cent. BOC also took shares and subsequently cut its holding.
The report lists Irish lessors Avolon and SMBC Aviation Capital as secured creditors. SMBC confirmed that it has one aircraft leased to the group with six managed on behalf of investors. Avolon has not commented, but its exposure is understood to be small.
The report states that Norwegian has a reasonable prospect of survival if proposals, including cutting its fleet and aircraft orders, and renegotiating terms with creditors, are followed through. If the court confirms its protection and Mr Wallace’s appointment on December 7th, he will have up to 100 days to put a rescue plan together based on those proposals.