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.