Vol 18 (2021) - Issue 1

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The Irish Scheme of Arrangement: Evolving Precedent and the Scheme of Nordic Aviation Capital Designated Activity Company

Synopsis
Few sectors have felt the impact of the COVID-19 pandemic more than the aviation sector, as government-imposed travel restrictions have resulted in an unprecedented decline in global air traffic. Shortly following the outbreak of the pandemic, the world's largest regional aircraft lessor Nordic Aviation Capital Designated Activity Company ('Nordic') was faced with anticipated breaches of financial covenants, the subsequent triggering of acceleration events and default within the wider group (the 'Nordic Group'). With the assistance of the Irish High Court, Nordic agreed a waiver and deferral with its lenders so as to prevent the acceleration or termination of the Nordic Group's financial liabilities for a limited period of time. The deal, which provided the Nordic Group with some muchneeded breathing space, was implemented by way of a creditor scheme of arrangement under Irish law. The Irish High Court delivered its judgment approving the scheme on 21 July 2020.
Creditor schemes of arrangement have not been common in Ireland to date. This is mainly due to examinership being a more attractive process from a debtor's perspective, particularly where an operational as well as financial restructuring is required. However, the decision in Nordic is a further illustration of the evolving line of Irish scheme precedent, building on the recent scheme of arrangement of Ballantyne Re plc.
Although the aims of the schemes varied considerably – the Ballantyne scheme sought to novate Ballantyne's reinsurance obligations and cram down USD 1.65 billion of its senior New York law governed debt in order to facilitate the solvent wind up of Ballantyne Re plc, while the Nordic scheme sought to defer the payment of principal and interest for a set period of time – the Irish High Court has shown, in both schemes, that it has the flexibility to use both Irish and foreign jurisprudence to solve complex issues.
This article focusses on the key features of the Nordic scheme as well as its wider implications on cross-border restructuring and the interplay between domestic and international law.