Irish Schemes Of Arrangement And Cross-Border Debt Restructuring

Published date12 November 2020
Subject MatterFinance and Banking, Insolvency/Bankruptcy/Re-structuring, Debt Capital Markets, Financial Services, Financial Restructuring, Insolvency/Bankruptcy
Law FirmMaples Group
AuthorMr Robin McDonnell, Mary O'Neill, Karole Cuddihy and Niall O'Mahony

The Irish High Court has approved a scheme of arrangement in respect of Nordic Aviation Capital, the world's largest regional aircraft leasing company. The scheme restructured approximately US$5.9 billion of English, New York and German law governed debt owed by: the Irish-incorporated company, Nordic Aviation Capital DAC ("Nordic") and related Irish and foreign-incorporated companies (the "NAC Group").

The decision reinforces that the Irish courts will adopt a pragmatic and commercial approach, which is similar to (and arguably broader than) the approach taken by the courts of other common law jurisdictions in relation to comparable complex international restructurings.

In particular, the Irish court took a wide approach to the ability to release liabilities owed to scheme creditors by third parties. The court approved of the release of debt owed by primary obligors which were not themselves subject to the scheme - provided that there is a "sufficient nexus" between the guarantee liabilities and the primary obligations. Nordic had guaranteed the US$5.9 billion of debt. It was, therefore, only Nordic that needed to be subject to a scheme of arrangement (the "Nordic Scheme").


COVID-19 has had a significant impact on the NAC Group's business, in particular by disrupting the ability of its lessee customers to meet their obligations. The consequence was a drop in cash collection and the market value of the NAC Group's asset base, and a risk of a potential covenant breach under the group's financing arrangements. The NAC Group took the view that bilateral waivers and deferrals with each of its lenders (of which there were more than 85) would not be possible. Nordic put forward evidence to the effect that, in the event of a covenant breach or other event of default, the NAC Group might have to file under Chapter 11 of the US Bankruptcy Code and / or be liquidated. Instead, a waiver and deferral binding on all of the NAC Group's lenders was implemented via the Nordic Scheme.

What is a Scheme of Arrangement?

A Scheme of Arrangement under Part 9 of the Companies Act 2014 ("Part 9 Scheme") is a flexible mechanism which allows for the restructuring of a company's debt and / or shareholding. The company does not need to be insolvent in order to avail itself of a Part 9 Scheme.

A Part 9 Scheme should be differentiated from a scheme of arrangement used in an examinership (an "Examinership Scheme"):

(i) Examinership Schemes are only available to companies...

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