Norwegian has managed to get rid of a total of 11 of the 36 planes the company believes should go out to adopt a rescue plan in Ireland. Four creditors and 25 planes are still intervening.
NB! In an earlier version of this case, it was claimed that Credit Agricole has provided guarantees for three aircraft to Norwegian. The correct number is new. The case has been amended.
On Tuesday, Norwegian reached another agreement with a central creditor.
The company and its Irish reorganizer have asked the court to terminate the contracts relating to a total of 36 leased aircraft. At the same time, they have worked against each creditor to obtain individual agreements.
During a hearing in the Irish court regulating the airline’s bank protection, it was confirmed that Norwegian also reached an agreement with ICBC (Industrial and Commercial Bank of China) on Tuesday.
Thus, Norwegian got rid of another 10 of the 36 planes. Last week it was reported that the two sides were on track to agree.
There are already agreements and understandings with players like AerCap, Mitsui, Airbus and Avalon.
There are now only four major creditors of Norwegian airlines left, with which the airline has not yet reached an agreement.
- Bank of Utah
- Agricultural Credit
- PK Air Finance
These four creditors have guarantees or leases related to 19 aircraft. Bank of Utah and Citi have 14 guarantees, Crédit Agricole 9 and PK Air Finance 2, which emerged during the hearing.
The judge said on Friday he will announce whether Norwegian will maintain its application or whether other solutions need to be found for the remaining four creditors.
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Cafes, guarantees and illusions
Bank of Utah is one of the leading U.S. players in the aircraft financing and management market.
The bank states, in its annual report for 2019, that it is the largest manager of so-called aircraft trusts in the FAA U.S. Aviation Registry. The bank manages the ownership of more than 2,100 aircraft.
Stephen Walsh, the lawyer representing Citi and the Bank of Utah, said the court itself should consider whether it was necessary to cancel the contracts of up to 36 aircraft.
He stated that none of the 14 aircraft for the customers he represents are long-haul aircraft, from which, in any case, the Norwegians will get rid of.
Walsh argued that the Norwegians would eliminate more planes than necessary, because they would like to, but that legislation in Ireland does not allow it.
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He thinks the Norwegian wants in a bag and a sack
The lawyer used an imaginary example of bankruptcy protection:
– Suppose you have a chain of cafes with six premises. He sees that two can be profitable and that you have to get rid of four, but then the company says they will get rid of five, because you can get a lower rent in a room next to the fifth, Walsh said and continued :
– Will the judge accept that he also gets rid of the fifth cafeteria? I would say this would not be done, Walsh said, concluding:
– This is not a plan that will provide the maximum possible return, but a plan that will provide real chances of survival. The company may have to live with contracts they don’t like, on the other side of the process.
Norwegian lawyer Paul Gardiner did not buy the arguments:
– Bank of Utah and Citi are beneficiaries (counterparties, journ.anm.) Of a guarantee given by a bankrupt company. It is an illusion of a right they are trying to defend (…) If the plan is approved, they will get back part of their guarantee, Gardiner said.
According to Gardiner, Citi and the Bank of Utah will not be left with anything special if Norwegian declares bankruptcy and dissolves:
– If the guarantor is liquidated, the contract will also be terminated, he continued.
Requires another hearing
Tuesday’s court hearing is about the last four creditors who are still opposed to resolving the terms of the leases.
They claim they cannot now decide whether they will fare better through a legally approved rescue plan or in a bankruptcy in Ireland.
Therefore, they need another hearing to clarify this. Some Norwegian lawyers strongly oppose it. Another consultation can ensure that the timetable is completely unfulfilled and that the goal is not reached by the end of April.
Whether they receive a hearing or their contracts expire, the judge will decide next Friday.
Leasing companies are the key
Norwegian’s strategy has all along been to pact with a majority of creditors who have financial interests in leases. And that the judge will give a sentence that will be able to terminate the last contracts that they themselves do not agree with the creditors.
If on Friday the judge decides that contracts with the last four opposing creditors can also be terminated, Norwegian is on track to achieve a goal in Ireland.
Then, most leasing companies will vote on the solution that will be presented to the judge approximately. one week.
And with a majority among leasing companies, the judge will be able to say yes to that plan. A majority of a group of creditors is sufficient, if the judge believes that all the others come out better than in a bankruptcy.
Once again, the Irish reorganizer, who is called the examiner, will vote yes on behalf of Ireland-related creditors at the subsequent court hearing in Norway.
And then it remains “only” to collect about 4.5 billion kronor from investors and the Norwegian state before Norway obtains permission to take off permanently from Dublin.
Norwegian completely leaves Max planes: it has canceled the advance to Boeing
It caused great losses for the planes that took off
The Norwegian is, along with the rest of aviation, in the greatest crisis of modern times. For Norway, it’s about whether the company will survive or not.
In November and December, the company applied for bank protection in Norway and Ireland, and the processes set out there will determine whether the company can be saved or liquidated.
The company depends on getting enough support among creditors so that the courts can adopt a redemption plan, in addition to the company having to be able to raise new capital, which the company itself has indicated will range from four and five billion.
The airline has decided to close its long-haul business, meaning 34 Boeing 787 Dreamliner aircraft will leave the fleet.
In addition, Norwegian will reduce the remaining short-distance fleet by about half to 53 aircraft, of which 50 will be in operation.
Norwegian released its fourth-quarter accounts on Friday. There, the company made a clean-up of NOK 12.8 billion, a loss for the plane that will leave the fleet.
In addition, the company’s chief financial officer confirmed that Norwegian would drop the Max aircraft for the time being and that it would operate a pure Boeing 737 NG fleet (in the case of Norwegian the 737-800 variant).