Lessor Nordic Aviation Capital Files For Chapter 11 Bankruptcy
Nordic Aviation Capital, the world’s largest regional aircraft lessor, has filed for Chapter 11 bankruptcy in the US in an effort to restructure its debts.
Documents filed with the US Bankruptcy Court for the Eastern District of Virginia show that NAC filed late in the day on the 17 December for Chapter 11 bankruptcy.
NAC, in its application to the US Bankruptcy Court, says it estimates it has between 1,000 to 5,000 creditors that its estimated liabilities are between US$1 billion to US$10 billion and that its estimated assets are between US$1 billion to US$10 billion.
Funds will be available for distribution to unsecured creditors, it says in the application which later lists the 30 largest unsecured creditors (see table at bottom of article). The largest unsecured creditor, by far, is PFA Pension, a Danish pension fund, that NAC says has US$523 million in unsecured notes with the lessor. The second largest unsecured creditor is Alitalia – Società Aerea Italiana S.p.A. which has a claim for US$2.3 million that NAC disputes and involves litigation. Other unsecured creditors include several maintenance, repair and overhaul (MRO) companies that do engine and airframe MRO.
NAC’s representative in the application to the court says: “The debtor [NAC] requests relief in accordance with the chapter of title 11, United States Code, specified in this petition.”
Chapter 11 bankruptcy in the US, unlike bankruptcy proceedings in some other countries, is one way that companies can gain a financial reprieve and restructure their debts.
This is the second time that NAC has tried to restructure its debts. NAC in July 2020 issued a statement saying “its lenders had voted unanimously to approve its proposed scheme seeking to implement a standstill on and deferral in respect of certain payment of interest and principal on its borrowings, covering the next 6-12 months.”
International law firm Linklaters – which represented lenders, namely banks and financial institutions – said in a statement in December last year that this earlier financial restructuring involved US$6 billion of debt.
The restructuring used a solvent Irish scheme of arrangement that was sanctioned by the Irish High Court and received recognition under Chapter 15 of the US Bankruptcy Code, says Linklaters.
The scheme included a deferral of payments of principal and interest on NAC’s borrowings for a 12-month period, it adds.
NAC’s 17 December 2021 chapter 11 bankruptcy application to US Bankruptcy Court
|Name of unsecured creditor||Unsecured claim|
|1||PFA Pension (a Danish pension fund licensed to manage and invest the pension funds in employees’ retirement savings accounts)||$522, 971,000|
|3||MTU Aero Engines||$1,423,000|
|4||Pratt & Whitney Canada (Singapore)||$1,200,000|
|5||Titan International Finance||$1,086,000|
|6||Pratt & Whitney Canada (Canada)||$1,000,000|
|7||De Havilland Aircraft of Canada||$530,000|
|9||Lufthansa Technik Aero Alzey||$375,000|
|10||APD Airplane Delivery||$268,000|
|12||Rheinland Air Services||$240,000|
|13||Wojskowe Zakłady Lotnicze||$220,000|
|14||SAMCO Aircraft Maintenance BV||$197,000|
|15||Maastricht Aviation Aircraft Services||$172,000|
|19||Direct Maintenance BV||$70,000|
|21||Magnetic MRO AS||$56,000|
|24||Fokker Services Asia||$48,000|
|25||PT Tobe Aviasi Indonesia TMB||$44,000|
|26||Ascent Aviation Services||$42,000|
|28||PT Gapura Angkasa||$39,000|
|29||Embraer Aircraft Maintenance Services||$34,000|
Note: figures are in US dollars and are rounded to the nearest thousand.
NAC is the world’s largest regional aircraft lessor with 475 aircraft in its portfolio including Airbus, ATR, De Havilland Aircraft of Canada and Embraer aircraft.
The company disclosed in September that in the 12 months ending 30 June 2021 it lost US$2.36 billion and that lease revenue during the period fell 15% year-on-year to US$642 million.
NAC has suffered financially because it was heavily exposed to some of the airlines that have gone into administration as a result of the pandemic.
German regional carrier LGW Luftfahrtgesellschaft Walter, which had a fleet of 15 Dash 8-400 aircraft, went into voluntary administration in April 2020. Its entire fleet was leased from NAC.
NAC was also the largest lessor to UK regional carrier Flybe, accounting for 18 of Flybe’s 54 aircraft. Flybe entered administration in March 2020.
In Asia, NAC has been impacted by Garuda Indonesia which announced, unilaterally, that it was returning its 12 Bombardier CRJ1000s on lease from NAC before the leases are due to expire, a move NAC immediately contested.
Garuda also announced that it is returning eight of its 19 ATR 72s. NAC is the biggest ATR lessor to Garuda.
NAC’s founder and a major shareholder is Danish billionaire Martin Møller Nielsen. But in 2015 Swedish investment company EQT and Danish investment company Kirkbi bought into NAC followed by the Singapore Government’s investment fund GIC in 2019. Kirkbi is the investment arm of the Kristiansen family, the Danish family behind The Lego Group.