On 26 May 2021 Norwegian Air Shuttle ASA (NAS) and related companies (Norwegian Air) exited examinership in Ireland. Through the restructuring Norwegian Air:
- raised NOK 6 billion (?590 million) in new capital through share and hybrid debt offerings;
- reduced its total debt since the end of 2019 by approximately NOK 63 - 65 billion to approximately NOK 16 - 18 billion (?1.57 to ?1.77 billion);
- discontinued its long haul operations;
- reduced its fleet from 156 aircraft to 51 aircraft and secured competitive leasing arrangements on its retained fleet, including "Power by the Hour" agreements through Q1 2022;
- terminated aircraft purchased orders representing CAPEX commitments of approximately NOK 85 billion in aggregated value; and
- pivoted to a short-haul network primarily operating in Norway and the Nordics or from Norway/ the Nordics to Continental Europe.
Norwegian Air has since begun a new chapter as a restructured, slimmed-down Nordic focused airline with a strong balance sheet and flexible aircraft leasing arrangements.
The restructuring, which principally occurred through the Irish examinership process under Part 10 of the Companies Act 2014, had many key and innovative features in terms of cross border restructurings, restructurings in the aviation sector and the Irish examinership process. Over the course of the examinership, the Irish High Court (the Court) delivered four separate judgments on key issues ranging from the appointment of Kieran Wallace of KPMG Ireland as examiner (the Examiner) to a Norwegian incorporated company, the repudiation of English law aircraft leasing arrangements, and the approval of highly complex and innovative schemes of arrangement formulated by the Examiner to restructure the companies.
A William Fry team, led by Ruairi Rynn, advised the Examiner on the formulation and ultimate approval of the unique schemes of arrangement to restructure NAS and the four Irish companies in examinership and we discuss the following key features of the restructuring in this note:
What is examinership?
Examinership is a statutory framework for restructuring companies in financial difficulty but which otherwise have a reasonable prospect of survival as a going concern post-restructuring. It is broadly comparable to chapter 11 of the US Bankruptcy Code and the recently introduced restructuring plan in the UK.
The essential features of examinership include:
- an automatic stay of 70 days (extendable to 150 days) on creditor enforcement action (subject to the application of Alternative A of the Cape Town Convention (see below));
- an examiner nominated by the applicant (typically the company) and appointed by the court formulates a scheme of arrangement for the restructuring of the company which, once approved, is binding on the company, its members and creditors;
- only one class of impaired creditor is required to approve the scheme of arrangement formulated by the examiner (acting by a majority in number representing a majority in value of those voting), which readily facilitates cross-class cram down; and
- the examiner's scheme is subject to confirmation by the Irish High Court which will principally consider whether the scheme is fair and equitable, provides the company with a reasonable prospect of surviving and whether any creditor is unfairly prejudiced or worse off under the scheme than in the most likely alternative scenario.
A wide range of solutions have been and can be employed to facilitate the survival of companies through examinership, including cross-class cram down of debt, terminating existing contractual commitments, introducing new debt or equity investment, replacing existing equity in full and debt for equity swaps. Furthermore, the process can be readily used in conjunction with other international processes and is capable of recognition and enforcement internationally (including automatic recognition across the EU).
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